European Natural Gas Prices Bounce Back

European natural gas prices rebounded to around €90/MWh from a two-week low of €88 on November 4, as persistent supply constraints continued to underpin the market. Despite the recent decline from record levels above €100/MWh, Europe’s energy balance remains fragile, with LNG deliveries from the Persian Gulf still disrupted by the Iran conflict. Tehran reported that a tanker had struck a mine in the Strait of Hormuz, while discussions with Oman are underway to restore shipping traffic. The conflict removed nearly a fifth of global LNG exports, leaving European inventories unusually low ahead of winter and intensifying competition with Asian buyers. EU storage levels have fallen to 74%, compared with a five-year seasonal average of 90%, while Germany’s reserves are below 61%. Colder temperatures and weaker wind and solar generation have increased withdrawals. Also, Norwegian pipeline supplies remain below capacity due to outages.

European natural gas prices fell to €85/MWh on Thursday, extending their losses to more than 18% so far this week and hovering at their lowest level in over two weeks. The decline reflects growing optimism over diplomatic efforts to resolve the US-Iran war, with Qatar continuing to mediate between the two sides. A sweeping Democratic victory in the US midterm elections also eased concerns about further military escalation, as the results could give Democrats greater influence over government spending, potentially limiting President Trump's ability to sustain military operations against Iran. However, supply tightness persists, as LNG deliveries from the Persian Gulf remain disrupted. The bloc is entering winter with its lowest gas storage levels in more than a decade, with inventories standing at 74.33% of capacity as of November 4 and well below the minimum target of 80%. Meanwhile, forecasts of colder temperatures across Northwest Europe are likely to boost heating demand.

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.