Key facts
- European natural gas prices hit a four-month high, briefly surpassing €60 per megawatt hour.
- The conflict escalation in the Middle East has led to fears of supply shortages for the upcoming winter.
- Disruptions to Qatari liquefied natural gas (LNG) exports are affecting global supply.
- Threats to shipping through the Strait of Hormuz, a critical energy transit route, are a concern.
- European gas storage levels are currently below last year's figures.
European natural gas prices have surged to a four-month high, driven by the escalating conflict in the Middle East and concerns over winter supply shortages. The Dutch natural gas benchmark briefly rose above €60 per megawatt hour (MWh) as the US expanded its aerial offensive and Iran retaliated with strikes on Bahrain and Kuwait.
Analysts at Independent Commodity Intelligence Services (ICIS) noted that Europe's gas supplies are under pressure, with the conflict delaying expected recovery in Qatari liquefied natural gas (LNG) exports during the critical summer storage season. Andreas Schroeder, head of energy analytics at ICIS, stated that a cold winter start would significantly increase the cost of meeting the EU's 80% storage target, though security of supply remains achievable.
European gas storage is currently less than 54% full, compared to 64% at the same point last year. ICIS calculated that only 26 LNG cargoes have managed to cross east out of the Gulf since the conflict began on February 28, a stark decrease from the usual 90 to 100 per month. The firm also cut its forecast for global LNG supply this year from 441 million tonnes to 431 million tonnes.
The renewed exchange of fire also threatens shipping transiting the Strait of Hormuz, through which approximately 20% of the world's oil and gas passed before the conflict. This has had a knock-on effect on oil markets, with Brent crude briefly breaching $90 a barrel on Sunday, its highest level in a month, before easing after Iran indicated diplomatic exchanges were continuing. Gas prices later eased to about €57 a MWh on Monday.