European natural gas prices jumped as discussions between Iran and Oman to reopen the Strait of Hormuz failed to convince traders that a deal would lead to a quick resumption of global LNG flows.
Benchmark futures rose more than 10% on Monday. Over the weekend, Iran said an agreement was “very close,” but signaled that a deal wouldn’t immediately reopen Hormuz, tempering hopes for a swift restoration of flows that would help Europe to replenish its gas stockpiles.
US President Donald Trump indicated he’s prepared to let economic pressure on Iran build rather than launch fresh military strikes to force a reopening of the strait. The president’s comments mark a shift from his repeated threats to escalate the bombing campaign against Iran.
Traders are also tracking the impact of prolonged supply cuts at Norway’s Ormen Lange gas field. The country is Europe’s biggest piped-gas supplier and any disruptions may increase price swings.
As deliberations in the Persian Gulf drag on and uncertainty mounts, Europe is running out of time to fill up its gas storage sites ahead of winter. The continent is now less than three months from the start of its heating season, and the prolonged supply disruption sets it up for intense competition with Asia for fuel.
Europe’s gas storage sites recently hit the lowest seasonal levels in records going back to 2009, exacerbating worries about winter supplies. The facilities are just below 59% full, falling short of the five-year seasonal norm of 76% for this time of year.
Citigroup Inc. strategists including Maggie Xueting Lin expect storage levels of about 74% by the end of October if Middle East LNG exports gradually resume as of mid-August. Yet they also see risks of sharper-than-usual demand spikes this winter if the El Niño weather phenomenon leads to extreme cold spells.
Dutch front-month futures, Europe’s gas benchmark, rose to €61.24 a megawatt-hour by 6:02 p.m. in Amsterdam. US natural gas futures rose by the most in more than two months as an unusually large swing in weather forecasts triggered a wave of short-covering among money managers who were the most bearish on gas since 2020.
With assistance from Julian Hast.
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