European Gas Climbs as Supply Risks Persist

European natural gas prices rose Monday as ongoing disruptions to Gulf LNG supplies, lower shipping traffic through the Strait of Hormuz and high temperatures increase concerns over supply and demand imbalances.

The September contract at the Dutch Title Transfer Facility (TTF), Europe’s largest and most liquid gas trading hub, settled at €61.42 per megawatt-hour (MWh) on Friday.

The contract was trading 1.4% higher at €62.26 per MWh as of 0932 GMT Monday.

According to data from Gas Infrastructure Europe (GIE), gas storage facilities across the European Union were 60.8% full.

– Hot weather boosts energy demand

European gas futures rose on the last trading day of last week as high temperatures increased electricity demand for cooling and, in turn, demand from gas-fired power plants.

The gains continued into Monday as LNG supplies from the Gulf remained disrupted and uncertainty persisted over US-Iran negotiations.

Continued Israeli military strikes on Lebanon despite a ceasefire, along with new US threats of sanctions against Iran, have also reduced expectations of an imminent agreement that could help reopen the Strait of Hormuz.

Shipping traffic through the strait has fallen sharply following recent attacks on vessels, highlighting continued security risks for LNG and other energy shipments.

– EU’s low storage adds to market pressure

Concerns over Europe’s gas inventories are also increasing, with storage levels remaining below historical averages and behind the pace needed to comfortably meet winter targets.

Heatwaves across southern and central Europe are making the situation more difficult. Higher temperatures are increasing demand for gas-fired power generation, meaning some gas that could otherwise be injected into storage is instead being used to produce electricity.

The combination of relatively low storage levels, strong summer power demand and uncertainty over LNG supplies is keeping the European gas market sensitive to developments in the Middle East.

Analysts expect uncertainty over the Strait of Hormuz and the pace of European storage injections to keep gas prices elevated this week, while changes in LNG flows are likely to remain a key driver of price movements.