Wholesale natural gas prices in Europe and Britain faced a 3 percent increase on Monday. This price rise occurred after the halt of trade negotiations in the Middle East and the increase in crude oil prices, reviving concerns about long-term disruptions in the energy hubs of continental Europe.
Price increases in the gas market
The front-month contract in the Netherlands for this month rose by 2.8 percent to €74.10 per megawatt-hour (MWh), partially recovering from heavy losses on Friday. In Britain, a similar daily contract also increased by 2.7 percent to 184.75 pence per therm.
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The impact of geopolitical tensions on the market
This price increase followed a week in which European gas futures faced an 8 percent decline. This drop marked the worst weekly performance since mid-June, during which traders locked in profits and the market sought alternative transport routes to bypass sensitive points in the Strait of Hormuz.
However, the diplomatic pause at the end of last week came after U.S. President Donald Trump publicly rejected Iran's proposal to reopen the Strait of Hormuz and end regional hostilities. Tehran, maintaining its tough conditions for opening this vital maritime passage, caused Brent crude prices to rise again to over $106 per barrel, prompting energy traders to quickly act to rebuild risk premiums in short-term gas contracts.
Concerns about reserves and the winter heating season
According to European gas infrastructure data, underground reserves across the European Union remain nearly 11 percent lower than the levels recorded during the same period last year. Given the bottlenecks in global liquefied gas supply and high Asian demand for flexible cargoes, any sudden change in temperature could lead to a rapid decrease in inventories and a renewed increase in wholesale energy prices.
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