European Natural Gas Prices Hold Steady as Traders Weigh Mixed Signals on Iran and Hormuz Strait Reopening

Deep News
09/28

European natural gas prices remained flat as traders weighed conflicting signals from the United States regarding negotiations with Iran over the reopening of the Strait of Hormuz.

Benchmark futures edged slightly higher, following a decline of more than 9% last week.

After U.S. President Donald Trump rejected Iran's latest proposal, Iran stated it would not ease conditions for reopening the Strait of Hormuz, though Trump simultaneously said talks could resume this week.

The slow pace of negotiations is increasing uncertainty over global energy supplies for the coming winter, and Europe is running out of time to replenish its already low gas storage levels before the heating season begins.

The Strait of Hormuz has historically handled approximately one-fifth of global liquefied natural gas shipments, and a prolonged disruption to the waterway would trigger fierce competition among energy buyers worldwide.

European natural gas prices swung sharply last week as news about the restoration of the energy corridor sent mixed signals.

People familiar with the matter said negotiators had explored an agreement that would restart navigation through the strait while the U.S. lifted its blockade on Iranian ports.

The framework resembled a memorandum of understanding reached in mid-June that produced a fragile ceasefire, though the subsequent agreement collapsed.

Marco Saalfrank, head of spot trading at Swiss energy company Axpo Holding AG, said gas prices could swing widely in both directions this winter, and that prices could surge above 100 euros per megawatt-hour if European gas supplies are disrupted and severe cold snaps hit both Europe and Asia simultaneously.

He added that prices could also fall if the disruption to gas transit through the strait is resolved or if Qatar finds alternative routes for LNG exports.

"Even if prices decline, they are not expected to immediately return to pre-war levels below 30 euros, and various uncertainties are likely to persist," he said.

Currently, fill rates at large European storage facilities stand at approximately 71%, below the five-year seasonal average of 87%.

However, LNG imports have recovered somewhat after a sharp drop in mid-August.

Germany, which has Europe's largest gas storage capacity, has fill rates at its storage facilities of just over 57%.

People familiar with the matter said that summer storage replenishment fell short of expectations, and Germany has discussed with industry players the possibility of implementing mandatory gas storage filling requirements next year.

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