European Gas Hovers Near Multi-Year Highs

European natural gas prices steadied at €79/MWh on Thursday, hovering close to its highest level in more than three years, amid rising concerns over the region’s gas supply outlook. European gas inventories remain below historical norms as escalating attacks in the Middle East continue to disrupt LNG shipments through the Strait of Hormuz, a critical route handling roughly 20% of global gas flows, mainly from Qatar. In the latest development, Iran said it had attacked 10 ships near the strait and warned it would step up strikes if Washington continued attacks on its territory, raising fears of deeper and more prolonged supply disruptions. Meanwhile, maintenance in Norway and lower Algerian flows to Italy are also limiting pipeline supplies to Europe. These supply risks come as Europe nears the end of its summer storage injection season, threatening to further intensify competition for global gas supplies during the winter.

European natural gas prices climbed to €80/MWh on Wednesday, extending gains for a fourth session to their highest level since December 2022, as continuing strikes in the Middle East heightened concerns over further supply disruptions. The US military said it destroyed five Iranian oil tankers near Kharg Island on Tuesday in response to attacks on its warships, while Tehran retaliated against US targets in Jordan. Iran-backed Houthi militants in Yemen also launched drones and missiles at energy facilities in southern Saudi Arabia. These underscored mounting challenges to restoring normal commercial traffic through the Strait of Hormuz. The sustained disruptions have forced Qatar to suspend shipments and extend force majeure on cargoes to Europe and Asia through autumn. The reduced LNG deliveries have slowed European storage injections, with gas inventories remaining below the seasonal average, leaving the market increasingly vulnerable as the winter heating season approaches.

European natural gas prices rose above €74/MWh on Tuesday, hovering at their highest level in more than three and a half years, as LNG supply from the Persian Gulf remained severely disrupted amid heightened US-Iran tensions. The escalation in fighting between the two nations underscored the difficulty of reaching a resolution to the conflict that could reopen the Strait of Hormuz, with Iran on Monday warning that energy infrastructure across the region, including US oil and gas facilities, could be vulnerable to further attacks. Qatar has largely suspended LNG shipments and extended force majeure on cargoes bound for European and Asian markets through the autumn, amid continued shipping disruptions through the critical waterway. The reduced inflow has slowed the pace of gas storage injections in Europe, with EU storage facilities around 66% full, below the seasonal average, leaving the gas market increasingly vulnerable as the heating season approaches.