European Gas Prices Advance

European natural gas prices rose to €42.4 per MWh on Monday, extending Friday's gains as the latest flare-up in the Middle East reignited supply concerns. Shipping traffic through the Strait of Hormuz had picked up in recent weeks but slowed following fresh attacks on vessels since Thursday, including a Qatar-linked oil tanker. This prompted strikes from the US and Iran over the weekend, marking the worst escalation since the two sides signed an interim peace agreement. However, Axios reported that the two countries have agreed to suspend further attacks and resume negotiations in Qatar on Tuesday. Weather conditions also supported gas prices, as a heatwave across Europe boosted gas demand from power generators to meet increased cooling needs.

European natural gas prices fell to around €40.6 per MWh, nearing an over two-month low, as shipping activity through the Strait of Hormuz showed signs of normalization following progress in US-Iran peace talks. Several empty Qatari LNG carriers have entered the Gulf in recent days to reload, signaling a potential recovery in gas shipments. However, an attack on a cargo ship by an unidentified projectile while sailing southeast of Oman renewed concerns over the security of the vital route. Meanwhile, Qatar's Prime Minister indicated that LNG production is expected to return to normal within a few weeks, apart from the damaged facility. The prospect of resumed LNG flows from the Gulf eased fears of a supply crunch and could help Europe replenish inventories ahead of next winter. This also offset support from strong power-sector demand amid hot weather and low wind speeds across Europe.

European natural gas prices fell to around €41.6 per MWh as progress in US-Iran talks eased supply risks. The US on Monday authorized Iranian oil sales under a temporary 60-day licence following productive talks in Switzerland over the weekend. Shipping activity through the Strait of Hormuz also began increasing, with more tankers openly transiting the waterway. Meanwhile, conflicting signals emerged after Iranian media denied US claims that Tehran had agreed to readmit IAEA inspectors or had accepted sanctions relief in exchange for reopening the strait and allowing renewed nuclear inspections. For Europe, concerns persisted over its ability to replenish gas inventories before next winter. European storage facilities are currently around 46.4% full, below the five-year average of more than 50% for this time of year. This left the market vulnerable, particularly as forecasts of hotter weather across Europe were expected to increase demand.