Price rise as Iran war hostilities flare, LNG supply tightens
- Middle East hostilities and stalled U.S.-Iran talks drive gas price surge
- LNG supply tightens as Qatar exports remain blocked and Australian strike cuts output
- EU gas storage levels remain low, raising concerns ahead of summer demand
Dutch and British wholesale natural gas contracts rose on Wednesday morning as fresh strikes in the Gulf cloud the outlook for any peace deal and the reopening of the Strait of Hormuz and as a strike in Australia could curb global liquefied natural gas (LNG) supply further.
The benchmark Dutch front-month contract at the TTF hub was up €1.66 at €49.27 per megawatt hour (MWh) by 0744 GMT, data from the Intercontinental Exchange (ICE) showed.
The British front-month contract was up 4.19 pence at 118.98 pence per therm.
"Both oil and gas prices are increasing this morning as hostilities in the Middle East resumed and talks between the United States and Iran showed little progress," analyst at Engie EnergyScan said.
Gulf hostilities flared again on Wednesday, with an Iranian missile attack damaging Kuwait's airport and the U.S. military carrying out strikes near the Strait of Hormuz, as diplomacy between Washington and Tehran showed little progress.
The conflict has cut global liquefied natural gas LNG supply by around 20%, with supplies from key producer Qatar that predominantly head to customers in nearby Asia stuck behind the closed strait.
"The focus remains on low EU storage levels ahead of the summer when competition for LNG from Asia for power generation and air conditioning is expected to increase," said Arne Lohmann Rasmussen, chief analyst at Global Risk Management.
Chinese LNG purchases have already rebounded to near previous-year levels in May, said Daniel Hynes, senior commodity strategist at ANZ.
Meanwhile, global supply shortages could worsen amid a strike by Australian workers at Inpex Corp's Ichthys LNG export project, which contributes around 2% of global output, and exports of around 9.3 million tonnes per year, he added.
EU gas storage sites were last 40.76% full, compared with 48.88% at the same time last year, Gas Infrastructure Europe data showed.
In the European carbon market, the benchmark contract was up €0.69 at €80.19 per metric ton.
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