UK Gas Hits 3-year High

UK natural gas prices rose past 104 pence a therm on Thursday, hovering at their highest level in almost three weeks, as increased consumption due to heatwave offset some of the relief from the reopening of the Strait of Hormuz. Extreme heat continues to bear down on Europe, sharply increasing electricity demand for air conditioning. This comes at a time when inventory levels are low. The region is struggling to replenish inventories following earlier supply disruptions, with storage facilities currently around 48% full, well below the 56% level recorded a year ago and the five-year average of 61%. Meanwhile, President Donald Trump said negotiators had made progress in indirect talks with Iran, signaling that diplomacy was holding despite recent hostilities.

UK natural gas prices dropped toward 102 pence a therm on the first day of July, retreating from an over two-week high, as signs of progress in US-Iran talks eased supply concerns. Qatar's Foreign Ministry said late Wednesday that mediators had concluded separate positive meetings and that all parties had agreed to continue discussions in the coming period. The talks came after recent exchanges of fire that threatened to derail the negotiations. UK gas prices fell 5.7% in June and plunged 18.5% in the second quarter, following an interim deal between the two sides that reversed most of the sharp gains recorded when tensions were at their peak. However, the downside has been limited by tight physical market in Europe. Storage facilities are currently around 48% full, well below the 56% level at the same time last year and the five-year average of 61%. Adding to this, an intense heatwave across Europe is boosting demand from electricity providers to meet increased cooling needs.

UK natural gas prices climbed to 104.6 pence a therm, the highest in over two weeks, as investors looked ahead to US–Iran talks in Qatar following weekend strikes from both sides that stoked supply fears. President Donald Trump said negotiations with Tehran are set to resume today after both sides agreed to halt a series of back-and-forth attacks over the Strait of Hormuz. Also supporting prices, hotter weather across Europe is ramping up gas-fired power generation to meet air conditioning demand, tightening supply conditions. The region continues to struggle to rebuild inventories to historical norms, with storage facilities currently around 48% full on average, raising concerns that the region could enter the winter season with the lowest gas reserves in 15 years. Despite the increase, UK gas prices are still set to end the month down by more than 5% and the second quarter with an 18% loss.