European gas prices steady near 3-week lows as traders weigh supply risks

European natural gas prices remained near three-week lows as traders weighed supply risks, balancing reports of Middle East diplomatic progress with storage deficits and shipping bottlenecks. Dutch front-month futures and British gas contracts traded flat on Wednesday, staying close to multi-week lows. This pause follows volatile trading, as energy desks processed competing supply signals.

Risk premiums have eased slightly after news emerged that U.S. and Iranian officials were nearing a draft agreement to allow safe passage through Persian Gulf shipping routes. While this easing of geopolitical tensions has driven gas prices down from recent peaks, market participants warn that structural supply constraints keep a floor under continental benchmark prices.

Even with diplomatic progress, liquefied natural gas (LNG) carrier traffic through the Strait of Hormuz remains limited, disrupting regular delivery schedules from key exporters like Qatar. This shipping slowdown, combined with Europe's low summer storage levels, has made it challenging to refill underground gas reserves before the winter heating season.

Currently, EU storage facilities hold 55% to 57% of capacity, the lowest seasonal level in nearly two decades and below five-year averages. Hot summer temperatures in central and southern Europe have added to the supply strain by increasing air conditioning demand. Utilities are also competing with Asian buyers for spot LNG cargoes.

Analysts anticipate that European natural gas contracts will stay supported, making the market highly sensitive to any delays or disruptions in the ongoing diplomatic negotiations.