European Gas Remains Near 3-Week High

European natural gas prices fell toward €45 per MWh but remained close to a three-week high amid persistent concerns over the sluggish pace of storage refilling. The region’s storage outlook remains tight, with inventories currently at around 48% of capacity, well below the 56% recorded during the same period last year and the five-year seasonal average of 61%. 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. Moreover, market participants noted that LNG deliveries to Europe have yet to increase sufficiently to ease regional supply constraints, despite a pickup in shipping activity through the Strait of Hormuz following progress in US-Iran diplomatic talks.

European natural gas prices rose to around €45.4 per MWh, the highest in three weeks, as increased consumption due to heatwave offset some of the relief from the reopening of the Strait of Hormuz. Extreme heat continues to bear down on Europe, sharply increasing electricity demand for air conditioning. This comes at a time when inventory levels are low. The region is struggling to replenish inventories following earlier supply disruptions, with storage facilities currently around 48% full, well below the 56% level recorded at the same period a year ago and the five-year average of 61%. Meanwhile, Qatar and Pakistan confirmed that the US and Iran made positive progress during indirect talks in Doha, signaling that diplomacy was holding despite recent hostilities. EU gas prices climbed more than 7% so far this week, on track for the first weekly gain in four.

European natural gas prices fell to €43 per MWh on the first day of July, retreating from an over two-week high, as signs of progress in US-Iran talks eased supply fears. Qatar's Foreign Ministry said late Wednesday that mediators had concluded separate positive meetings and that all parties had agreed to continue discussions in the coming period. The talks came after recent exchanges of fire that threatened to derail negotiations. EU gas prices fell 5.6% in June and dropped 14.4% over the second quarter, following an interim deal between the two sides that reversed most of the sharp gains recorded when tensions were at their peak. However, the downside has been limited by tight physical market conditions in Europe. Storage facilities are currently around 48% full, notably lower than the 56% level at the same time last year and the five-year average of 61%. Adding to this, an intense heatwave across Europe is boosting demand from electricity providers to meet increased cooling needs.