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EMEA Natural Gas Update: Futures Rally Amid Renewed US-Iran Hostilities Ahead of Talks

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European natural gas futures rose on Monday following a renewed flare-up between the US and Iran that has reignited supply fears, while further talks between the foes were reportedly scheduled for Tuesday in Doha.

Front-month Dutch TTF futures were up 2.94%, at 41.980 euros ($47.88) per megawatt-hour, while UK natural gas was up 3.37%, at 101.100 British pence ($1.34) per therm.

The Islamic Revolutionary Guard Corps claimed to have struck eight US military facilities in Kuwait and Bahrain, in retaliation over US strikes against Iran late last week, according to a report by Al Jazeera.

Things have since calmed, with both sides agreeing to pause attacks ahead of the next round of talks, which are set to be held in Doha on Tuesday, according to Axios, citing an unnamed senior US official.

The crucial Strait of Hormuz, which usually accounts for one-fifth of global LNG flows, saw traffic dip yet again, following fresh attacks against commercial vessels. Just five vessels transited the Strait over the past 24 hours, according to the Hormuz Strait Monitor.

According to Daniel Hynes, a senior commodity strategist at ANZ, empty LNG tankers have continued to line up near Qatar's export plants, but their passage through the Persian Gulf would depend "on securing safe passage through the strait."

European natural gas inventories are at 48.29% of capacity, compared to 57.77% a year ago, according to Gas Infrastructure Europe.

Inventories were also below the five-year average for this period, at 62.9%, according to the Swiss Federal Office of Energy.

Based on current trends, Europe looks set to end the gas refilling season, which runs from April to October, with inventories just 76% full, the lowest level in 15 years, according to a report by the Financial Times, citing Wood Mackenzie.

The European Commission, however, has reassured the markets that gas storage at just 80% of capacity would be enough to secure supplies during Winter, with overall gas demand down by 17% across the region.

Europe is also facing a record heatwave, with countries such as the UK, France, Switzerland and Germany hitting new "all-time high temperature records," with the mercury surging past 40 degrees Celsius, according to Severe-Weather EU.

That has increased air conditioner use, increased power consumption, some of which is produced with natural gas.

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