Eco
European natural gas prices are poised to register their first weekly gains in three weeks, driven by escalating uncertainty surrounding the prospects of a peace deal between the United States and Iran. This comes amidst intensified fighting in the Middle East and the consequent effective closure of the Strait of Hormuz since the conflict began. Dutch front-month gas futures, the European benchmark for gas prices, rose by 0.09% to reach 48.91 euros ($57.10) per megawatt-hour at the time of this report, after experiencing a decline in the previous session. Benchmark contracts have also climbed by approximately 7% since last Friday, positioning them for their first weekly advance following three weeks of declines. This surge occurs amid weak indications of progress in talks aimed at ending the conflict and reopening the vital Strait of Hormuz. Despite earlier statements by US President Donald Trump suggesting that negotiations were proceeding well, a new wave of violence has erupted in the region. The Tehran-backed Hezbollah group rejected a US-brokered truce in Lebanon, further escalating tensions. The primary concerns in the European gas market currently revolve around the region's ability to refill its vast storage facilities before winter, with their current capacity just exceeding 41%. Should the Strait of Hormuz remain closed, competition with Asian markets for seaborne liquefied natural gas (LNG) shipments is expected to intensify this summer. Concurrently, natural gas contracts in the United States increased by 0.34% to $3.35 per million British thermal units at the time of writing, having hit a four-month high yesterday, coinciding with a greater-than-expected decrease in domestic gas inventories. Forecasts of hot weather in the coming weeks have also contributed to the price surge. Any disruptions to US supplies could potentially impact Europe, which has grown increasingly reliant on American gas since Russian pipeline flows largely ceased following the war in Ukraine.
