European wholesale natural gas prices moved lower on Friday after shipping data showed that liquefied natural gas (LNG) cargoes continue to transit the Strait of Hormuz, easing immediate concerns over a major disruption to global supplies despite escalating tensions in the Middle East.
The benchmark Dutch front-month gas contract declined 2.3% to €48.97 per megawatt-hour (MWh), giving back part of the sharp gains recorded earlier in the week. In the UK, the equivalent front-month contract fell 2.4% to 117.90 pence per therm.
Although prices retreated during Friday’s session, both contracts remained on track to post a second consecutive week of gains as geopolitical developments continued to add a risk premium to energy markets.
LNG Shipping Activity Reassures Traders
The decline in gas prices came despite continued military tensions following the latest exchange of airstrikes between the United States and Iran. The breakdown of the 17 June ceasefire has heightened concerns over security around the Strait of Hormuz, one of the world’s most important energy shipping routes.
However, traders took comfort from live satellite tracking and shipbroking data showing that several LNG tankers departing from Qatar successfully passed through the waterway during the previous 24 hours without disruption.
While Iran has increased naval patrols and intensified vessel inspections in the area, commercial shipping has continued to operate, reducing fears of the severe supply interruption that markets had begun to anticipate.
Healthy European Storage Limits Price Impact
European gas markets have also been supported by strong storage levels, with inventories remaining comfortably above the seasonal average for July. The healthy stock position has helped cushion the market against short-term geopolitical uncertainty.
Even so, traders remain alert to further developments. A prolonged confrontation, direct disruption to LNG export infrastructure or a withdrawal of insurance cover for vessels travelling through the Persian Gulf could quickly reverse recent price declines and push European gas prices back above the €50 per MWh level.
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