European Natural Gas Prices Stabilize After Sharp Drop

European natural gas prices stabilized at €95/MWh on Tuesday after tumbling more than 8% in the previous session on optimism over a potential diplomatic breakthrough in the Middle East, following signals from the US and Iran of a willingness to engage in peace talks. 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, significantly 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.

European natural gas prices fell 10% to €93/MWh on Monday, their steepest decline since April 8, as renewed hopes for US-Iran negotiations eased concerns over disruptions to Middle East energy supplies. Iran’s supreme leader reportedly authorized the government to pursue talks, following reports that President Donald Trump wanted to give diplomacy more time. The decline reversed part of last week’s rally, which pushed prices above €100/MWh for the first time since 2022, with geopolitical risk accounting for a significant premium. However, supply concerns remain as colder weather approaches and storage levels are below target. Germany’s gas reserves were just 61.03% full on November 2, missing the government’s 70% goal, while EU-wide storage stood below 75%, a historically low level. Forecasts point to temperatures 2C to 4C below normal in major German cities, with freezing conditions possible in southern and eastern regions.

European natural gas prices fell to €100/MWh on Monday as diplomatic efforts in the Middle East helped ease concerns over further escalation, although prices remained elevated amid tight supply conditions. Iranian negotiators held a third consecutive day of talks with Qatari mediators in Doha on Sunday, seeking to reach an agreement to end the war. Meanwhile, US Secretary of State Marco Rubio said Saturday that diplomatic contacts with Iran remained active and that President Trump had yet to decide on new strikes on Iran. However, Iran's Supreme Leader warned the US and Israel against launching further attacks. Gulf LNG supplies remain severely disrupted amid security threats around the Strait of Hormuz. Europe's gas storage levels remained historically low, standing at 74.62% as of November 1. With temperatures falling and withdrawals already beginning in several countries, storage levels are likely to face further pressure, keeping upside risks to prices.