European Natural Gas Prices Fall Further

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.

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.