European natural gas prices rose on Tuesday, approaching their highest levels since late 2022 as attacks on Saudi Arabian infrastructure and continuing disruptions to Middle Eastern shipping routes increased concerns about liquefied natural gas supplies.
The benchmark Dutch TTF front-month natural gas futures contract gained 1.22% to €89.12 per megawatt-hour (MWh).
In the United Kingdom, NBP natural gas futures increased 1.2% to 219.76 pence per therm, with both benchmarks trading near levels last recorded in late 2022.
The latest increases reflect concerns about the availability of imported gas as European countries prepare for the winter heating season.
Houthi Attacks Increase Concerns Over Middle Eastern Energy Supplies
Energy markets reacted to reports of coordinated drone and missile attacks carried out by Yemen’s Houthi movement against infrastructure in Saudi Arabia.
The group said its targets included an Aramco oil processing facility in Yanbu, the Shaybah oil field and military and airport infrastructure in Abha and Riyadh.
The reported attacks have added to uncertainty surrounding energy transportation routes through the Red Sea and Persian Gulf.
Liquefied natural gas shipments passing through the Strait of Hormuz remain severely constrained, according to the supplied market information.
Shipping disruptions have forced some LNG carriers to take longer routes around Africa, extending delivery times and reducing the volume of spot cargoes arriving at European import terminals.
These developments have increased concerns about the availability of replacement supplies, particularly as European buyers prepare for higher seasonal demand.
The information provided does not establish the extent of any physical damage to Saudi energy infrastructure or quantify the direct impact of the attacks on natural gas production.
European Gas Storage Levels Remain Below Seasonal Norms
European gas inventories are another important factor influencing wholesale prices.
Underground gas storage facilities across the European Union were approximately 74.1% full, below historical levels for mid-October.
Storage levels in Germany, one of Europe’s principal industrial gas consumers, were lower at approximately 60% of capacity.
These inventory levels leave less stored gas available ahead of the winter withdrawal period than would otherwise be the case.
Lower storage reserves can increase the importance of continuing imports, particularly if colder weather raises demand for heating and electricity generation.
The combination of reduced inventories and uncertainty surrounding LNG shipments has limited the scope for a sustained decline in wholesale gas prices.
European Buyers Face Increased Competition for LNG Cargoes
Middle Eastern LNG deliveries to Europe were approximately 80% lower than a year earlier, according to the supplied market data, reflecting continuing shipping constraints.
The reduction has increased Europe’s reliance on alternative sources of imported gas.
European utilities are consequently facing greater competition from Asian buyers for available spot LNG cargoes originating in the Atlantic basin.
Competition for these shipments may influence wholesale prices, particularly when buyers seek additional supplies at short notice.
Higher borrowing costs in Europe could also affect industrial demand for energy, although the impact of monetary conditions on gas consumption remains uncertain.
For investors, the latest developments highlight the sensitivity of European gas markets to shipping disruptions, storage levels and competition for imported supplies.
Higher wholesale prices may increase costs for energy-intensive businesses and utilities purchasing gas on market-linked terms, while potentially benefiting producers selling into higher-priced markets.
The financial impact will vary depending on individual companies’ purchasing arrangements, production exposure and hedging positions.
Market participants will be monitoring LNG shipping conditions, European storage withdrawals and developments in the Middle East for indications of whether supply constraints persist.
Changes in winter demand and the availability of alternative cargoes will also remain important influences on European natural gas prices.
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