European gas prices rose above €100 a megawatt hour for the first time in almost four years. Traders are pricing in possible US strikes on Iran and a colder-than-usual winter, with storage emptier than usual.
Dutch natural gas for November delivery jumped 5% to €100.95 per MWh on Wednesday, a level last touched in December 2022. Benchmark prices have gained 39% this month.
Iran strikes threaten Middle Eastern LNG supply
President Donald Trump has indicated the US may strike Iran after the midterm elections on November 3, raising expectations of further curbs on LNG shipments from the Middle East. The Wall Street Journal reported that the US has told several Gulf Arab countries to prepare for a short, intense military campaign.
Consultancy Energy Aspects said in a note that Qatari LNG exports are likely to be lower in November and December. In addition, the December delivery price implies traders see a 73% probability of a Middle Eastern LNG shortage this winter, up from 51% last week.
Cold forecasts and low storage add pressure
Weather adds to the uncertainty. Forecasters have warned of a potential "sudden stratospheric warming" that could send cold Arctic air into northern Europe in November. A much cooler winter would lift consumption just as storage is emptier than usual.
Gas expert Anne-Sophie Corbeau of Columbia University's Center on Global Energy Policy said: "Nobody really knows how cold or warm the [European] winter is going to be." Traders have turned to options to hedge, and Dutch gas options on the Intercontinental Exchange reached 3mn contracts on Friday, the most since trading began in 2013.
US prices fall, but exports are capped
US prices fell to their lowest in almost two years this week on warmer near-term forecasts.
Low US prices should help Europe, but US exports are capped by liquefaction capacity, and record-high shipping costs add significantly to the price of LNG imports. LNG delivered into north-west Europe hit $31.16 per million British thermal units on Monday, according to Spark Commodities.
European gas prices have almost trebled since the US and Israel attacked Iran at the end of February. After nearly eight months of conflict, analysts say Europe's gas system has few buffers left.
Source: Financial Times
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