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EMEA Natural Gas Update: Futures Plunge 10% on Peace Agreement

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European natural gas futures extended losses in after-hours trading on Monday after the US and Iran agreed on a draft deal to end hostilities in the Middle East and reopen the Strait of Hormuz, easing concerns over global LNG supply disruptions.

The Dutch TTF front-month contract dropped 9.435% to 42.36 euros ($49.15) per megawatt-hour, while the UK NBP front-month contract was down 10.321% to 100.36 British pence ($1.35) per therm.

"The European gas prices already fell quite noticeably on Friday due to reports of a pending peace agreement, and the market is of course further down Monday after the deal was finally agreed upon," Mind Energy said. "The TTF front-month contract has therefore fallen more than 10% in a matter of just three days."

Pakistan's prime minister announced the breakthrough, confirming that both sides had declared an immediate and permanent cessation of military operations on all fronts, including in Lebanon. The agreement is scheduled to be formally signed in Switzerland on June 19 and includes the lifting of the US naval blockade on Iranian ports and the reopening of the Strait of Hormuz.

The easing of prices comes as Europe faces a combination of energy and environmental challenges, with extreme heat increasing pressure on power systems, Atmospheric G2 said in a social media post on Monday. It said the risk of blackouts is rising, solar panels may operate less efficiently at very high temperatures, some nuclear power plants could be forced to reduce output, and low river levels are adding further stress to energy and water resources.

Additionally, European buyers need to replenish inventories ahead of winter. Gas Infrastructure Europe reported that EU inventories remain 44.34% full, shy of the 53.40% seen this time last year.

Elsewhere, LNG prices edged lower in North Asia but remained near USD18/MMBtu, Daniel Hynes said. "Asian buying has been robust in recent weeks as strong demand triggered by hot weather has seen an increasing number of countries enter the spot physical market," he said.

While shipping activity through the Strait of Hormuz remains limited despite the agreement, India's Petronet LNG Limited sent the LNG tanker Disha through the Strait of Hormuz on Monday, making it the 13th LNG tanker to transit the passage since hostilities began, Reuters reported, citing Kpler and LSEG data.

The vessel, which reportedly loaded cargo at Qatar's Ras Laffan terminal on Mar. 1-2 and had remained west of the strait since then, is expected to arrive at India's Dahej LNG terminal on June 18.

However, the report said market participants cautioned that confidence in the route may take time to recover. Shippers in Asia and Europe reportedly told Reuters that the resumption of regular transit through the Strait of Hormuz could take weeks, with navigation expected to normalize only once safety conditions are fully assured following the US-Iran framework agreement to reopen the waterway.

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