European Gas Market Firm as LNG Supply Risks Persist

European natural gas prices fluctuated above €65/MWh, their highest level since January 2023, amid concerns over global LNG supply after the Middle East conflict disrupted around one-fifth of global LNG flows and hindered Europe’s summer stockpiling. EU gas storage levels are currently around 63% full, the lowest seasonal level since 2009, well below historical averages. While the European Commission remains confident that substantial spare LNG import capacity and a storage target of 80% will be sufficient to meet winter demand, Europe is expected to face intense competition from Asia for available cargoes. Meanwhile, signs of improving flows through the Strait of Hormuz and discussions surrounding an Iran–Oman shipping arrangement have eased some concerns over immediate supply disruptions. Market attention is increasingly shifting toward the economic and sanctions-related consequences of the Iran situation rather than an imminent physical supply shock.

European natural gas prices fell to €67.5/MWh on Friday, but remained near their highest level since January 2023, as supply risks remain amid uncertainty over a Middle East peace deal. Prices jumped on Thursday after reports that President Trump was not interested in returning to the terms of a June deal with Iran. This reversed losses from earlier this week, which were driven by progress in talks between Pakistan and Iran to end the conflict and an agreement between Tehran and Oman on control and revenues tied to the Strait of Hormuz. The near-closure of the Strait has continued to disrupt LNG supplies from Qatar, while extreme summer heat-driven cooling demand diverted supplies from storage. These have left Europe scrambling to secure supplies, heightening fears that the region could enter the winter heating season with insufficient reserves. For the week, European gas prices climbed more than 4%, their third straight weekly gain.

European natural gas prices hovered around €66.6 per megawatt-hour on Thursday after declining for the previous two sessions, as investors assessed diplomatic progress in the Middle East. Iran’s military said Tehran and Oman had reached agreements on the sharing of control and revenues from the Strait of Hormuz. However, Tehran stressed that the deal does not imply an immediate reopening of the waterway and warned that the strait will remain closed unless the US ends the war, raising uncertainty over when supply conditions will improve. Continued restrictions in the strait have disrupted LNG flows from the Persian Gulf, causing severe delays to shipments from major exporter Qatar. At the same time, extreme summer heat has boosted demand for gas-fired power generation, leaving European gas storage just 63% full, the lowest level for this time of year since 2009. As a result, prices are likely to remain volatile, particularly if supply disruptions persist into the heating season.