Supply concerns have started to be reflected in pricing again in the European natural gas market.
Benchmark futures contracts rose by up to 4.3% today before giving back part of their gains. Despite the pullback, prices remain close to the highest intraday levels seen since January 2023.
The October natural gas contract has gained around 10% this week.
Strait of Hormuz concerns support prices
The US airstrikes on Iran entering their second day and US President Donald Trump's refusal to rule out the possibility of a deal to end the conflict have increased supply concerns in energy markets.
Weaker hopes for a short-term resumption of energy flows through the Strait of Hormuz have strengthened upward pressure on European natural gas prices.
Developments in the region, which is critical for Europe, are being closely monitored, particularly in terms of LNG supply and global energy competition.
“We do not expect a crisis like 2022”
Morningstar senior analyst Tancrede Fulop said they do not expect Europe to face an energy crisis on the scale of 2022, but noted that the continent remains structurally vulnerable to another gas shock.
According to Fulop, Europe's gas balance will remain tight next year.
The analyst expects meaningful normalisation in natural gas prices to be difficult before 2028, when new global LNG supply is expected to come online.
Critical situation in Europe's gas storage facilities
Ongoing supply concerns are also threatening Europe's efforts to refill natural gas storage facilities ahead of winter.
Gas storage levels in Europe are currently reported at around 65%, marking the lowest seasonal level in records dating back to 2009.
As winter approaches, Europe's need to import more gas to refill storage facilities could also increase competition in the global LNG market.
Price rises to EUR 73.42
BMI said Europe's need to replenish its gas inventories ahead of winter will strengthen the continent's import demand.
According to the report, this could lead to more energy cargoes being redirected from east to west, while upward pressure on benchmark prices in Asia could also persist.
The front-month Dutch TTF natural gas contract, Europe's benchmark, rose 1.7% to EUR 73.42/MWh in Amsterdam as of 08:30.
Eyes remain on the Strait of Hormuz
The course of the US-Iran conflict, energy transportation through the Strait of Hormuz and the pace at which Europe can replenish its gas inventories ahead of winter will be key factors determining the direction of natural gas prices in the coming period.
Every new development in the Strait of Hormuz carries the potential to trigger another wave of price increases in Europe's energy bill and the global LNG market.
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