Natural gas prices in bulk in Europe and Britain slightly decreased on Tuesday, while these prices had reached their highest level in 2023 the day before. This price drop occurred as markets took action to lock in profits amid a risky week for global central banks.
Details of the Natural Gas Price Drop
The Dutch natural gas contract for next month (TTF) fell by 0.7 percent to around €82.80 per megawatt hour (MWh), thus stabilizing below Monday's peak of €83.40. In Britain, the equivalent NBP contract also decreased by 0.7 percent, reaching 200.10 pence per therm. This price remains above the key level of 200 pence and had reached its highest level in several years in previous days.
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Gas Reserves Situation in Europe
Underground gas reserves in Europe have reached about 68 percent of their capacity, which is lower than the five-year seasonal average. This situation is putting significant pressure on the market and has added to market concerns. JERA CEO, Yukio Kan, warned on Monday that Europe's empty reserves severely expose power grids to long-term disruptions in the Strait of Hormuz and increasing global competition for immediate LNG shipments.
Additionally, rising tensions in the Red Sea and an increase in Brent crude oil prices to $113 per barrel have intensified concerns. Saudi Arabia has blamed Iran for the attack on its East-West pipeline, which could disrupt up to 4 percent of global oil supply. New Houthi attacks on maritime routes in the Red Sea have further delayed the normalization of shipping.
A significant diplomatic meeting in Oman to negotiate the safe passage of tankers through the Strait of Hormuz was unexpectedly postponed, severely limiting Qatar's LNG export flow through the Gulf. Following the European Central Bank's rate hike of 0.25 percent to 2.50 percent on Thursday, the U.S. Federal Reserve will also begin its two-day FOMC meeting on Tuesday, with markets considering a 90 percent probability of a 0.25 percent interest rate increase.
With ongoing energy input costs fueling price increases, energy traders expect central banks from Frankfurt to Washington to continue restrictive monetary policies until 2027 to prevent secondary price cycle occurrences.
Read more: Saudi Arabia and the UAE Halt Hormuz Negotiations
