European Gas Prices Surge on Supply Fears

European natural gas prices fell below €95/MWh on Tuesday on hopes of a resolution to the Middle East conflict, though prices remained near multi-year highs amid winter supply concerns. Saudi Arabia, Turkey and Pakistan held talks with Iranian officials on Monday, with Tehran describing the discussions as “very good.” However, the prospect of an immediate peace remains uncertain as attacks on shipping in the Strait of Hormuz continue, heightening concerns over LNG supply security ahead of winter. European gas storage is about 75% full, the lowest seasonal level on record, while Germany’s reserves stand at just over 61%. Replenishment could become more challenging as temperatures are forecast to fall across the continent, potentially boosting heating demand in the coming days. Unplanned outages in Norway are also adding to supply concerns. Tight global gas supplies are fueling competition between Europe and Asia for cargoes, which could intensify further once colder weather sets in.

European natural gas prices climbed above €96/MWh on Monday, hitting a fresh 2022 high as escalating military conflict in the Middle East heightened concerns over gas supplies ahead of winter. LNG shipments from the Persian Gulf, which accounted for around a fifth of global supply before the conflict, remained largely disrupted, with flows approximately 80% below year-earlier levels. Meanwhile, European gas storage stood at just 74.62% of capacity as of October 25, below historical averages for this time of year. Concerns are mounting as some EU countries have begun drawing on stored gas amid falling temperatures. With gas storage levels relatively low, Europe remains vulnerable to further supply disruptions and a potential surge in heating demand, increasing the risk of price spikes.

European natural gas prices extended their rally, rising above €93/MWh on Friday to hit a fresh multi-year high as ongoing disruptions to Persian Gulf supplies kept the global LNG market tight ahead of winter. Reports of US preparations for a possible new attack on Iran after the US midterm elections also heightened concerns of sustained supply disruptions. LNG shipments from the Middle East remained around 80% below year-ago levels, setting the stage for more intense competition between Europe and Asia, the world’s two largest LNG-importing regions, for available cargoes. European gas storage stood at 74.62% of capacity as of October 22, the lowest seasonal level since records began in 2009, leaving the region with a limited buffer ahead of winter and increasing its vulnerability to further supply disruptions and stronger heating demand. European gas prices have climbed over 6% this week, their fourth consecutive weekly gain.