European Gas Market Firm as LNG Supply Risks Persist

European natural gas prices surged above €65 per megawatt-hour, the highest level since January of 2023, as worries mounted over potential disruptions to global liquefied natural gas (LNG) supply following the Middle East conflict. This conflict had halted roughly one-fifth of global LNG flows, making it difficult for Europe to stockpile gas over the summer months.

Currently, EU gas storage levels sit at 63% capacity, the lowest seasonal figure since 2009 and well below historical averages. Despite this, the European Commission maintains confidence that ample spare LNG import capacity and a storage target of 80% will be enough to cover winter demand. However, Europe is anticipated to face fierce competition from Asia for the remaining available cargoes.

Additionally, positive developments in the Strait of Hormuz and talks regarding an Iran–Oman shipping arrangement have somewhat alleviated concerns about immediate supply interruptions. As a result, market focus is gradually shifting from the risk of a sudden physical supply shock to the economic and sanctions-related ramifications of the Iran situation.