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EMEA Natural Gas Update: Futures Rally Despite US-Iran Ceasefire Extension

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European natural gas futures rallied on Wednesday despite the US and Iran reportedly agreeing to extend their 60-day ceasefire under the Islamabad Memorandum of Understanding.

Front-month Dutch TTF futures rose 2.88% to 60.425 euros ($69.81) per megawatt-hour, while UK NBP futures climbed 2.73% to 148.150 British pence ($2.00) per therm.

On Wednesday, Pakistani government sources told Anadolu Agency that both Washington and Tehran had agreed to extend the ceasefire, which was set to expire on August 17.

"Both sides have conveyed their consent to the mediators to extend the deadline," a government official reportedly told the agency.

Meanwhile, Iran's newly appointed Supreme National Security Council chief, Mohsen Rezaei, said on Wednesday, in a post on X, that the Strait of Hormuz would remain closed until the US ends its war and blockade against Iran, releases all frozen Iranian assets, and agrees to a regional ceasefire encompassing Lebanon and Gaza.

"Until all conditions are met, the Strait will remain closed," he warned, dimming hopes for a swift resolution to the conflict.

Traffic through the strategically crucial Strait, which accounted for one-fifth of global LNG flows, held steady at 18 transits on Tuesday, according to ShipFinder.

Daniel Hynes, a senior commodity strategist at ANZ, highlighted a surge in LNG loadings by Qatar, with the 10-day moving average of the Ras Laffan facility at 10 kilotonnes.

He noted that their eventual exports depend on safe transit via the Hormuz Strait.

Hynes also noted Europe's increasingly precarious position, with the region's gas inventories nowhere near its target of 90% before the start of the heating season, as gas imports continued to dwindle starting in April this year.

European gas inventories stood at just 59.40% of capacity, compared to 72.01% 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 76.2%, according to the Swiss Federal Office of Energy.

Several European countries are also bracing for disruption to solar power generation from Wednesday's solar eclipse, prompting warnings from grid operators including the UK's National Energy System Operator, Spain's Red Electrica and the Netherlands' TenneT.

This comes at a time when Europe is expecting its fifth major heatwave of the season, affecting France, the UK, Italy, Central Europe and the Balkans, with temperatures expected to reach between 40 and 43 degrees Celsius, according to a report by Severe-Weather EU.

Such persistently high temperatures add to the region's space cooling demand and its gas-fired power burn, making it harder to refill reserves.

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