President Donald Trump stated that the United States will not attack Iran before the November midterm elections and described the negotiations between Washington and Tehran as "productive," sending European natural gas prices lower.
In early Friday trading, benchmark futures fell as much as 3.3%, giving back gains from earlier in the week. Trump's comments raised market expectations that tensions in the Middle East may ease temporarily. Previously, Iran's continued attacks on oil tankers in the Strait of Hormuz had pushed energy prices higher once again. European natural gas futures remain more than double their level before the Iran conflict.
Europe has little time left to replenish unusually low gas storage levels before winter arrives. If energy flows through the Strait of Hormuz cannot be restored, the region will have to compete even more aggressively for gas supplies during the heating season. Although liquefied natural gas shipments through the Strait of Hormuz have edged up recently, any renewed disruption—combined with rising winter demand—could push prices higher again.
Iran's semi-official Fars news agency reported late Thursday that several oil tankers came under mine attacks while attempting to pass through the southern shipping lane of the waterway, with multiple "violent explosions" occurring in the Strait of Hormuz. The report has not been confirmed by independent sources. EU gas storage facilities are currently about 73% full, the lowest level for this time of year on record.
The Institute for Energy Economics and Financial Analysis said in a report that given thin buffer inventories and tight global supply, Europe may need to cut natural gas demand by 7% this winter. The report noted that if demand is not reduced and the storage gap is instead filled through additional gas imports, the cost would reach 3 billion euros ($3.4 billion).
Comments