European natural gas prices moved sharply higher on Thursday, recovering from recent declines as supply constraints and slow storage replenishment once again became the dominant drivers of the market, outweighing optimism surrounding diplomatic developments in the Middle East.
Dutch front-month gas futures, the European benchmark, rose 2.2% to around €54.50 per megawatt-hour. In the UK, the equivalent wholesale gas contract advanced more than 2.4% to 134.20 pence per therm after falling to a three-week low during the previous trading session.
The rebound highlights the ongoing fragility of Europe’s energy market. Although reports of a provisional agreement between Iran and Oman over safe shipping routes briefly reduced geopolitical risk premiums, liquefied natural gas (LNG) shipments through the Strait of Hormuz remain significantly disrupted.
Delays to vessel movements continue to restrict summer exports from major Gulf suppliers, including Qatar, leaving global LNG supplies under pressure.
These logistical challenges are also complicating Europe’s preparations for the winter heating season. European Union gas storage sites entered August at around 55% capacity, well below the average level typically seen over the past five years and representing one of the slowest seasonal storage refill rates in recent memory.
Storage injections have also been hindered by unusually hot weather across central and southern Europe, where elevated electricity demand for air conditioning has increased gas-fired power generation instead of allowing additional supplies to be stored underground.
At the same time, strong competition from Asian buyers for available spot LNG cargoes is expected to keep European gas prices well supported until storage levels begin to recover more rapidly ahead of the winter season.
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