European Gas Prices Hold Gains

European natural gas prices rose back above €93/MWh on Wednesday after two straight days of declines, as markets assessed conflicting signals on the progress of US-Iran talks. Qatar said on Tuesday it saw hope for an interim agreement as mediators continued exchanging proposals. However, an Iranian official reportedly said that a deal to end the war remains out of reach. The talks come amid continued Iranian strikes on commercial vessels in the Strait of Hormuz, while the US conducted limited defensive strikes on Iranian targets. Supply concerns persisted amid rising heating demand and Europe's storage levels remaining below seasonal targets. Germany’s storage facilities were around 61% full, below the government’s 70% target, while EU-wide reserves remained below 75%, the lowest level recorded for this time of year. With temperatures across Northwest Europe expected to fall further this week, heating demand is likely to increase.

European natural gas prices fell more than 3% to below €92/MWh on Tuesday, their lowest level in over a week, extending Monday’s 8.7% decline. The retreat followed reports of progress towards a potential US-Iran diplomatic agreement, raising hopes of an end to the eight-month conflict and easing the geopolitical risk premium that had pushed prices above €100/MWh last week for the first time since 2022. However, underlying supply concerns remain as colder weather boosts demand and storage levels fall short of targets. Germany’s gas reserves were just 61.05% full on November 2, below the government’s 70% goal, while EU-wide inventories remained under 75%, the lowest level on record for this time of year. Temperatures across Northwest Europe are expected to decline further this week, increasing heating demand and the need for additional LNG imports.

European natural gas prices rose above €98/MWh on Tuesday, recouping part of the previous session’s losses as reports of a US strike on Iran's Qeshm Island stirred fresh concerns over an escalation of the conflict. Prices had tumbled more than 8% on Monday as diplomatic efforts to resolve the conflict eased fears of further supply disruptions. President Trump on Monday hinted at progress in negotiations to prevent a renewed conflict, while Tehran said "intensive" exchanges were underway and offered to reopen the Strait of Hormuz under strict conditions. Still, investors remained cautious as attacks on shipping in the key waterway continued. Meanwhile, Europe's gas supply remained tight, with storage levels standing at 74.56% as of November 2, well below historical averages. Forecasts of unseasonably cold temperatures across Northern and Central Europe this week are also expected to lift heating demand, which could prompt utilities to start early withdrawals from storage.