EU Natural Gas Falls Further Toward 20-Month Low

European natural gas prices climbed above €49 per MWh on Wednesday, the highest in nearly a month, as renewed tensions in the Middle East stoked fears of a new wave of supply disruptions. Iran said it had attacked US military bases in Bahrain and Kuwait after Washington launched strikes on Iranian targets and revoked a license permitting the country to sell oil. The US actions came in response to attacks on three merchant vessels in the Strait of Hormuz. The fresh attacks threaten the interim deal reached last month that had reopened the vital shipping route. Additional support came from forecasts of an intense heatwave across parts of Northwest Europe, which is expected to boost electricity demand for air conditioning and increase gas-fired power generation. This comes amid a slower-than-usual pace of seasonal storage replenishment. Moreover, flows from Norway, currently the region's largest single pipeline supplier, fell slightly after seasonal maintenance was extended.

European natural gas prices rose more than 5% to above €46 per MWh on Tuesday, recouping losses from the previous day after reports that a Qatari LNG tanker was attacked while exiting the Strait of Hormuz. Iranian state TV said that the vessel came under attack after disregarding warnings, though it did not explicitly claim responsibility. Earlier, two commercial ships were reportedly hit by Iranian missiles, putting the agreement aimed at halting attacks in the waterway to the test. Further supporting prices, weather forecasts indicate that another spell of extreme heat is set to hit Northwest Europe, which is expected to significantly boost air-conditioning use and power demand. The increase in demand comes as the region’s gas inventories remain relatively low, with storage facilities currently around 49% full, well below the nearly 60% level recorded at the same time last year. This heightened concerns over whether Europe will be able to rebuild sufficient reserves ahead of winter.

European natural gas prices fell to €44.4 per MWh on Monday after climbing to a three-week high in the previous session, as geopolitical tensions in key shipping routes eased significantly. Shipping traffic through the Strait of Hormuz continues to recover amid progress in diplomatic efforts. However, concerns persist over Europe’s slow progress in rebuilding gas inventories. The region’s storage outlook remains tight, with storage facilities currently around 49% full, well below the nearly 60% recorded during the same period last year. The relatively low inventory levels have reinforced concerns about the region’s ability to build adequate reserves ahead of winter. Also providing near-term support for prices, high temperatures across much of Europe accelerated gas-fired power generation to meet air-conditioning demand.