UK Natgas Prices Drop on Hormuz Deal Hopes

UK natural gas prices fell below 185 pence per therm on Friday, reversing part of the previous session’s gains amid reports of US-Iran discussions over a phased agreement to reopen the Strait of Hormuz and end the US blockade. The strait remains a major sticking point in efforts to resolve the nearly seven-month conflict, with neither side willing to relinquish control of the key waterway. LNG flows from the Persian Gulf remain severely disrupted, intensifying competition between Europe and Asia for limited supplies just as the region races to rebuild inventories ahead of the winter heating season. European gas storage is currently just over 70% full, still below both the seasonal norm and the region’s target, leaving the market vulnerable to further supply disruptions. UK gas prices have fallen about 7% over the week.

UK natural gas prices rose toward 190 pence per therm on Thursday, recovering from a three-week low amid uncertainty over a resolution to the Middle East conflict that could reopen the Strait of Hormuz. Iranian President Masoud Pezeshkian said that Tehran would never surrender to the US but remained open to dialogue and diplomacy, while setting conditions for a return to negotiations. The key waterway remains largely closed, impeding LNG flows from the Persian Gulf. Europe’s gas storage position remains a key concern as the winter heating season approaches. Storage facilities are around 70% full, still below the five-year seasonal average and the region’s 80% target. Goldman Sachs expects European and Asian gas prices to rise sharply if Gulf LNG exports remain constrained.

UK natural gas prices dropped below 180 pence per therm on Wednesday, their lowest level since September 4th, as renewed US-Iran talks revived hopes for a diplomatic resolution. President Donald Trump said US officials had a very good meeting with Iranian representatives on the sidelines of the UN gathering, though no further details were provided. Tehran also reportedly signaled a willingness to reopen the Strait of Hormuz within seven days if Washington eases military pressure and lifts its blockade. Rising numbers of LNG tankers and crude carriers using alternative routes have also alleviated some supply concerns. However, uncertainty surrounding the conflict and the outlook for energy transportation remains. Europe’s gas storage facilities are around 69% full, well below the 85% five-year seasonal average, leaving the market vulnerable ahead of the winter heating season.