European natural gas prices moved modestly higher on Thursday as continued disruption to shipping through the Strait of Hormuz and below-normal storage levels kept supply concerns in focus ahead of the winter heating season.
Benchmark Dutch front-month gas futures gained 0.2%, remaining firmly above multi-month support levels. British wholesale gas contracts posted a stronger increase of 0.7% as traders factored in tighter near-term availability across North Sea import hubs.
The gains followed some profit-taking on Wednesday and suggest that a substantial geopolitical risk premium remains priced into European energy markets despite signs of stabilisation elsewhere in global financial markets.
Hormuz shipping disruption keeps pressure on LNG supplies
The principal factor supporting gas prices remains the severe slowdown in commercial shipping through the Persian Gulf.
Shipping data from tracking services cited by Reuters indicates that tanker movements through the Strait of Hormuz remain heavily restricted. The strategic waterway has historically handled roughly one-fifth of global liquefied natural gas flows, making disruption particularly significant for international LNG markets.
Most major shipowners continue to avoid the route because of security concerns linked to the US-Iran conflict. Daily commodity vessel traffic remains in single digits, substantially below levels recorded before the war.
The disruption has prevented some Qatari LNG cargoes from moving normally through the region, intensifying competition for alternative supplies. European utilities are consequently having to compete more aggressively with Asian buyers to attract spot LNG shipments to their import terminals.
Storage shortfall adds to pre-winter concerns
European storage levels are creating another source of pressure. Data from Gas Infrastructure Europe shows underground facilities across the European Union at approximately 60% of total capacity.
Persistent heatwaves during the summer increased demand for gas-fired electricity generation as air-conditioning use climbed. Combined with delays to LNG deliveries, this has slowed the normal seasonal rebuilding of inventories.
The structure of the forward gas market is also complicating efforts to replenish storage. With the curve remaining in deep backwardation, utilities have less financial incentive to purchase expensive spot gas today and hold it for future delivery.
As a result, Europe could enter the autumn heating period with thinner-than-usual supply buffers if storage injections fail to accelerate.
Meanwhile, the US Department of the Treasury’s unexpected decision to increase long-dated bond buybacks has helped stabilise global yields. However, improved financial-market conditions offer little direct relief for Europe’s physical gas market, where constrained LNG movements and insufficient storage remain the dominant risks.
Leave a Reply