European natural gas prices climbed for a fourth consecutive session on Monday, reaching their highest levels in several weeks as escalating tensions around the Strait of Hormuz combined with unusually low storage inventories to intensify concerns over supplies heading into autumn.
Benchmark Dutch front-month futures rose 1.83% to €62.55 per megawatt-hour, touching their strongest level since July 24. British wholesale contracts recorded an even larger advance, rising more than 2% to 154.01 pence per therm and also reaching their highest intraday level since July 24.
The gains marked a fourth straight positive session for both benchmarks, their longest consecutive daily advance since late July.
Hormuz tensions add geopolitical premium
The latest move follows an escalation in U.S. diplomatic and military rhetoric towards Tehran ahead of the weekend.
Energy traders have increased the geopolitical risk premium embedded in European gas prices after Washington warned that it could impose a complete naval blockade on Iranian ports if restrictions on commercial shipping through the Strait of Hormuz continue.
The prospect of stronger naval enforcement has further reduced expectations that an agreement restoring normal maritime traffic can be reached quickly.
Disruption through the waterway has left LNG tankers originating from Qatar stranded and delayed spot cargoes that would otherwise be heading towards European import terminals.
European utilities are simultaneously competing with Asian buyers for available LNG supplies. Asian importers have been bidding aggressively for uncommitted cargoes, increasing the challenge for European companies seeking replacement volumes on the global spot market.
Low storage levels increase Europe’s exposure
Supply concerns are being amplified by a significant deficit in European gas inventories.
Figures from Gas Infrastructure Europe show that underground storage facilities across the European Union are only 59% full, an unusually low level for the middle of August.
Intense summer heatwaves have contributed to the shortfall by increasing the amount of gas burned by utilities to meet cooling-related electricity demand. Delays to LNG imports have further restricted the pace at which inventories can be replenished ahead of the winter heating season.
Market pricing is also making storage injections less attractive. Immediate gas supplies are commanding a substantial premium, leaving the forward curve deeply backwardated.
That structure reduces the economic incentive for traders to purchase expensive spot gas today and store it for delivery later, potentially making it more difficult to rebuild inventories before colder weather arrives.
Energy markets remain focused on supply risks
With relatively few European economic releases scheduled at the beginning of the week, gas traders are looking primarily to geopolitical developments and movements in wider energy and commodity markets for direction.
Broader financial markets received some relief from softer U.S. inflation indicators last week, which strengthened expectations for a more dovish Federal Reserve stance.
European gas markets face a different set of pressures, however. Energy analysts continue to see limited scope for a sustained decline in prices while shipping through the Strait of Hormuz remains disrupted and European storage inventories remain significantly below normal seasonal levels.
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