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EMEA Natural Gas Update: Futures Rally Amid Relentless US Strikes Against Iran, Low EU Inventories

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European natural gas futures extended their rally on Monday after US forces completed their ninth-straight night of attacks against Iran, as the conflict continued to escalate over the weekend.

The front-month Dutch TTF contract rose 2.19% to 58.650 euros ($66.97) per megawatt-hour, while the front-month UK NBP contract gained 1.78% to 141.220 British pence ($1.89) per therm.

Futures neared their highest level in four months amid mounting fears of deeper supply disruptions, as the US Centcom continued to strike targets in Tehran, according to a post on X, aimed at diminishing the country's ability to target commercial shipping along the Strait of Hormuz.

In retaliation, Tehran reportedly struck US targets in Bahrain and Kuwait, according to Trading Economics, diminishing all hopes for a quick resolution in the conflict.

Meanwhile, the Strait of Hormuz, which accounted for one-fifth of global LNG flows before the conflict, continued to see traffic, with 13 transits being made on Sunday, despite the rising hostilities, according to ShipFinder.

Daniel Hynes, a senior commodity strategist at ANZ, noted that these latest developments stand to "complicate Europe's efforts to refill its storage facilities," which he noted were below their seasonal averages.

European gas inventories stood at just 53.67% of capacity, compared to 64.34% during the corresponding period a year ago, according to Gas Infrastructure Europe.

Inventories were also significantly below the five-year average for this period, at 59.2%, according to the Swiss Federal Office of Energy.

Weather forecasts, however, have started to turn bearish, with Central Europe and the Balkans, which experienced unprecedented heatwaves in recent weeks, seeing temperatures drop, due to a "deep low-pressure system influencing the region," according to a report by Severe-Weather EU.

This primarily impacts countries such as Hungary, Poland, Romania, and the Balkan Peninsula, which are set to see a dramatic drop in heat-related strain, bringing down space cooling demand and consequently, consumption of gas-fired power.

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