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EMEA Natural Gas Update: Futures Fall in Profit Taking Pause

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European natural gas futures extended losses in after-hours trading on Friday, as traders took profits following a rally of more than 13% over the week driven by escalating conflicts in the Middle East and concerns over low gas inventories.

Front-month Dutch TTF futures fell 2.324% to 80.140 euros ($93.01) per megawatt-hour, while British NBP futures declined 2.311% to 200.330 British pence ($2.71) per therm.

Despite Friday's pullback, both benchmarks remained on track for a fifth consecutive weekly gain. Prices had rallied sharply as the widening conflict in the Middle East heightened concerns over global winter supply security, Investing.com said.

European gas prices earlier this week reached their highest levels since December 2022 after Ukrainian attacks on Russian gas infrastructure in a remote Arctic region raised fresh concerns over the security of Russia's energy exports.

The attacks heightened concern in Europe, which relies heavily on LNG supplies from Russia's Yamal Peninsula. Benchmark gas prices subsequently moved above 80 euros per MWh, Bloomberg reported.

Ukraine has expanded its ability to conduct long-range strikes against targets deep inside Russia, increasing the risk to critical energy infrastructure. A potential attack on Yamal LNG, Russia's largest LNG plant, is among the key concerns for the European gas market despite the plan to stop Russian imports completely by January in protest of the Russian invasion of Ukraine in 2022.

Europe's gas storage sites were just 67.64% full, according to Gas Infrastructure Europe, down from 79.86% at the same time last year. Inventories were also well below the five-year average of 83.8% for the period, according to the Swiss Federal Office of Energy.

While the European Commission has said there is no immediate threat to gas security this winter, a prolonged disruption to Gulf LNG supplies could tighten global availability, forcing Europe to compete more aggressively with Asia and other buyers for alternative cargoes. That could push prices higher as colder weather begins to lift heating demand, Trading Economics said.

What else is happening in Commodities?

Commodities

US Oil Update: Benchmarks Jump 8% as Markets Brace for Prolonged Iran Conflict

Crude futures settled higher in after-hours trading on Thursday as escalating attacks on shipping in the Middle East raised fears that the conflict between the US and Iran could drag on and further disrupt global energy supplies.Front-month West Texas Intermediate futures rallied 8.3% to $103.93 per barrel, while Brent futures surged 7.8% to $108.31/bbl.Gelber & Associates strategists said that the prospect of simultaneous pressure on both export corridors is raising shipping risk and reducing confidence that rerouting can offset constrained Gulf traffic.US commercial crude oil inventories decreased by 400,000 barrels to 424.1 mmbbls in the week ended Sep. 4, the Energy Information Administration said in its weekly report released Thursday.Crude inventories matched the five-year average for this time of year, the EIA said. The draw is significantly below Investing.com's estimate of 1.4 million barrels for the week ended Sept. 4.On Thursday, the US sanctioned firms and individuals that it says are aiding Hezbollah and other Iranian proxies in the Middle East as Washington intensified its campaign to isolate Iran economically.The latest package of sanctions by Treasury's Office of Foreign Assets Control hit entities and individuals in Iraq, Lebanon and Turkey that the US said supported Kata'ib Hezbollah, an Iraqi Shia paramilitary group under the command of the IRGC, and Hezbollah, a Lebanese Shia party.On Wednesday, President Trump said that the US may hit Iran's Pickaxe Mountain, located near its heavily damaged Natanz uranium enrichment facility, warning that the Iranian conflict would likely last beyond the November midterm elections.Fueling bullish sentiment, the US military destroyed five Iranian crude oil tankers in retaliation for Tehran's attempted attacks on an American warship. The US Central Command said it had redirected 96 commercial vessels to ensure compliance as of Sep. 10.Iran, in response, targeted two US warships and eight oil tankers in the Persian Gulf, marking the biggest wave of tit-for-tat attacks on vessels in the Hormuz by both sides since the onset of the Middle East conflict in February.Iran's Islamic Revolution Guards Corps said that Tehran will respond to any attack with a far greater number of strikes, noting that if the US hits two or three Iranian targets, its navy would respond by hitting 20 targets.The risk is that escalation could lead to meaningful disruptions to Strait of Hormuz flows, ING strategists said in a note Thursday, adding that the market could tighten more sharply if ongoing escalation translates into disrupted oil flows.On the demand side, China has reportedly stepped up purchases in recent weeks after months of subdued demand, boosting physical crude markets.ING analysts said that while imports remain well below year-ago levels, they've started to recover from the lows seen in June; recent physical-market activity suggests this could continue.

Commodities

US National Average Diesel Prices Cross $6/Gal for 1st Time in History, GasBuddy Says

US national average diesel prices reached $6 per gallon for the first time in history on Thursday, GasBuddy said in a statement, as Middle East tensions and tightening global supplies continue to push fuel costs higher.The American Automobile Association's national diesel average reached $5.9773/gal Thursday, nearing the $6/gal mark, according to the AAA website.GasBuddy said its real-time data captured the $6/gal milestone first, adding that it comes less than a week after prices set a fresh all-time record of $5.85."It is a level diesel has never reached...," according to GasBuddy's statement.Diesel prices are now up roughly $2.30/gal from a year earlier, when the national average stood near $3.70/gal, according to GasBuddy."Not every day are new all-time records set, and this will be a particularly painful one for the economy that may not even be immediately felt, but record diesel prices will impact every cargo, shipment, every delivery Americans are taking, and are likely to reignite inflation up and down the supply chain," said Patrick De Haan, head of petroleum analysis at GasBuddy.He warned of a costlier holiday season, with diesel prices set to continue their rally as geopolitical tensions persist.The milestone comes weeks after diesel futures first crossed the $5/gal threshold, as Strait of Hormuz product exports remained below pre-war levels and Russia's export ban tightened global supplies, according to a Bloomberg report earlier on Thursday.

Commodities

US Natural Gas Update: Prices Rebound on Short Covering, Global Energy Strength

US natural gas futures rebounded from a two-week low in after-hours trade on Thursday, supported by short covering and strength across crude oil and European natural gas markets, despite an unexpectedly large weekly inventory build reported by the US Energy Information Administration.The front-month Henry Hub contract and the continuous contract each rose 0.64% to settle at $2.840 per million British thermal units.The October contract fell as low as $2.753/MMBtu after the EIA reported a 40 billion cubic feet increase in US natural gas inventories for the week ended Sept. 4. Prices subsequently recovered and moved into positive territory in later trading.Natural gas futures gained alongside crude oil and European gas prices, which surged on Thursday as escalating US-Iran hostilities heightened concerns about prolonged disruptions to global energy supplies. European gas prices also remained supported by inventories that were substantially below year-ago levels and historical averages.In the US, persistent warm weather provided additional support. Barchart, citing Commodity Weather Group forecasts, said above-average temperatures were expected across the South and Southeast through Sept. 19. NatGasWeather.com also forecast strong gas demand over the next seven days, with persistent heat in the South and temperatures exceeding 100 degrees Fahrenheit in some areas.The broader market, however, expects cooling demand to decline steadily from the second half of September as temperatures moderate with the transition into autumn.US natural gas demand stood at 79.4 Bcf on Thursday, more than 14% above the level recorded at the same time last year, according to data cited in the market.Power demand has also remained elevated. The Edison Electric Institute said total US electricity output rose 19.69% year-on-year to 100,302 gigawatt-hours in the week ended Sept. 5. Generation over the 52 weeks ended Sept. 5 increased 3% from a year earlier to 4,392,478 GWh.Despite the supportive weather and broader energy-market gains, natural gas futures initially declined after the EIA inventory report.Despite being larger than expected, the 40-Bcf storage build was below the five-year average increase of 52 Bcf for the week. Total working gas in storage stood at 3,254 Bcf, or 148 Bcf, or 4.9%, above the five-year average for this time of year. The smaller-than-average injection narrowed the storage surplus to the five-year norm compared with the previous week.Strong US production continues to keep inventories well supplied. US dry gas production was estimated at 113.4 Bcf per day on Thursday, up 3.7% from the same period a year earlier, Barchart said, citing BNEF data.Trading Economics said US natural gas output averaged 112.9 Bcf/d during the first 10 days of September, remaining above August's record monthly average.Meanwhile, estimated net flows of natural gas to US LNG export terminals totaled 19.7 Bcf/d on Thursday, up more than 3% from the previous week, indicating continued strong demand from the LNG export sector.