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EMEA Natural Gas Update: Futures Jump as Supply Concerns Overwhelm Peace Progress

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European natural gas futures rose sharply in after-hours trading on Thursday as negotiations over commercial shipping through the Strait of Hormuz continued beyond the timeframe US Treasury Secretary Scott Bessent had forecast earlier this week, and supply concerns took center stage.

The front-month Dutch TTF contract climbed 8.102% to 56.650 euros ($65.26) per megawatt-hour, while the front-month UK NBP contract rose 8.911% to 139.450 British pence ($1.88) per therm.

The gains followed Wednesday's decline to a three-week low, Trading Economics said, driven by optimism about talks to resolve the Middle East crises and restore normal traffic through the Strait of Hormuz. On Thursday, prices rebounded on persistent concerns about supply risks.

Iran and Oman are nearing a final understanding on a commercial shipping route through the Strait of Hormuz, Iranian Foreign Ministry spokesperson Esmaeil Baqaei said Thursday, according to a Ministry of Foreign Affairs Telegram post. The proposed framework would give Tehran control over ships entering the Gulf through the strait, Reuters reported, citing officials familiar with the matter.

Shipping through the strait would face "no fees or tolls" under the temporary agreement between Iran and Oman, an Iranian government official said, according to multiple news outlets. The official also reportedly said the United Nations' International Maritime Organization and the US would participate in announcing the agreement.

A separate Gulf government official said the arrangement has been endorsed by members of the Gulf Cooperation Council.

Meanwhile, European gas inventories were 57.87% full, compared with 69.96% during the same period last year, according to Gas Infrastructure Europe. Storage levels were also well below the five-year average of 74.4% for this time of year, according to the Swiss Federal Office of Energy.

Timera Energy said European storage is entering the winter refill season at depleted levels and warned that the longer the Strait of Hormuz remains restricted, the further prices will need to rise along an increasingly inelastic demand curve to bring the market back into balance.

Extreme heat across Europe is also limiting efforts to rebuild gas inventories. Italy placed all of its major cities under the highest heat alert on Thursday as a severe heatwave swept across the continent, setting a national temperature record in Austria, fueling wildfires in France and disrupting energy and transport systems, Euronews reported.

Looking ahead, Atmospheric G2 said in a Thursday social media post that its latest seasonal forecast suggests a wetter turn in Europe beginning around October-November, with Atlantic weather patterns becoming more influential through the fall and into winter. A strong El Nino is expected to persist into winter, creating a generally milder, wetter, and windier backdrop across Europe, conditions that typically point to lower energy demand overall.

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