UK Natural Gas Rises Further on Supply Risks

UK natural gas prices rose above 154 pence a therm on Monday, reaching a fresh three-week high amid continued disruption to LNG supplies from the Gulf as US-Iran negotiations stalled. Renewed Israeli strikes against Tehran-backed Hezbollah in Lebanon, along with the latest US threats of additional sanctions on Iran, have further clouded prospects for an imminent agreement to reopen the Strait of Hormuz. Traffic through the waterway has fallen sharply following recent attacks on vessels, highlighting persistent security risks. For Europe, concerns over gas inventories are becoming increasingly pressing, as storage levels remain below historical averages and are lagging the pace needed to comfortably meet pre-winter storage targets. Efforts to rebuild inventories have also been hampered by heatwaves across Southern and Central Europe, which have boosted demand for gas-fired power generation, diverting supplies from storage.

UK natural gas prices rose above 151 pence a therm on Friday, the highest in three weeks, amid persistent concerns over Europe’s gas supply security ahead of winter. The US on Thursday threatened to keep its naval blockade of Iran indefinitely and vowed to step up economic pressure on the country as ceasefire talks stalled. The standoff has heightened uncertainty around the Strait of Hormuz, with both sides making competing claims of control over the strategic waterway. The disruption has severely delayed LNG cargoes from Qatar, forcing European buyers to compete aggressively with Asian importers for limited supplies. This is making it harder and more costly for Europe to rebuild gas inventories before winter, with storage facilities currently only 59% full, below historical averages. Meanwhile, heatwaves across Southern and Central Europe have boosted gas-fired power generation to meet cooling demand, diverting supplies from storage. UK gas prices have risen over 11% this week.

UK natural gas prices fell to 145 pence a therm on Thursday but remained more than 8% higher so far this week, as supply concerns persisted amid uncertainty over efforts to resolve the Middle East conflict and reopen the Strait of Hormuz. Talks between the US and Iran appear to have hit an impasse, with both sides taking a firmer stance and President Trump insisting that Washington has full control of the key waterway and intends to keep it that way. Shipping disruptions have sharply curtailed LNG flows from the Gulf, significantly delaying cargoes from major exporter Qatar and making it difficult for Europe to rebuild gas inventories ahead of winter. Analysts anticipate European gas prices will maintain a firm floor until storage levels show clearer signs of building before the heating season begins. At the same time, intense summer heatwaves across Southern and Central Europe have ramped up gas-fired power generation to meet cooling needs, diverting supplies from storage.