European Natural Gas Sees Lower Volatility

European natural gas futures held above €50/MWh on Friday, softening their recent volatility for the second session and closing the week slightly lower as markets assessed how Europe and Asia will source their LNG with the halt of exports from the Persian Gulf. Attacks from Iran to GCC nations rose in magnitude at the turn of the week, dimming bets of imminent de-escalation. The war drove QatarEnergy to halt operations in their liquified natural gas facilities, responsible for 20% of the global market. Additionally, LNG shipments from the UAE remained halted as tankers refrained from routing through the Strait of Hormuz, driving European natural gas prices to hover 60% up since the start of the month. Still, fresh data showed that US natural gas output rose to a record high last year, and investment in LNG continued to rise, supporting alternatives for European countries that depend on LNG shipments since the EU limited Russian gas imports in 2022.

European natural gas futures climbed further above €50/MWh, as the Middle East war continued to disrupt LNG shipments to Europe. Iran's new supreme leader said on Thursday the Strait of Hormuz will remain closed, heightening concerns over prolonged supply interruptions. The conflict has led QatarEnergy to suspend operations at its LNG facilities, which account for roughly 20% of global supply. LNG exports from the UAE also remained largely halted as tankers avoided the Strait due to security risks. These disruptions have intensified competition for US LNG, which has become a vital source of gas for Europe after reducing its reliance on Russian supplies. In response, the EU has begun exploring measures to curb rising prices, including a potential price cap. EU gas storage levels are currently below 30%, nearly 20% down from a year ago, underscoring Europe’s vulnerability to further supply shocks. So far this month, prices have surged over 60%.

European natural gas futures surged back to above the €50/MWh on Wednesday, over 60% higher since the start of March amid growing concerns about supply shortages following the halt of LNG shipments from the Persian Gulf. Attacks from Iran to GCC nations and Israeli-US forces picked up in magnitude, dimming bets of imminent de-escalation. The war drove QatarEnergy to halt operations in their liquified natural gas facilities, responsible for 20% of the global market. Additionally, LNG shipments from the UAE remained halted as tankers refrained from routing through the Strait of Hormuz. The events lifted competition for US LNG that has been key to European power amid the EU's effort to become independent from Russian supplies. Consequently, the EU has already started considering options to lower prices, including a possible cap on prices and state aid measures. Natural gas storage within the EU were around 29.4%, nearly 20% down from the previous year.