European natural gas futures rallied on Thursday, snapping a two-day losing streak even as tensions around the Strait of Hormuz eased following an agreement between Iran and Oman over control of the strategically vital waterway.
Front-month Dutch TTF futures rose 3.21% to 67.735 euros ($78.96) per megawatt-hour, while UK NBP futures rose 3.12% to 166.050 British pence ($2.27) per therm.
On Wednesday, Iran's Deputy Foreign Minister, Kazem Gharibabadi, said that Tehran and Muscat had agreed terms on a new temporary transit route along the Strait of Hormuz for commercial vessels, which would be seven miles wide, as reported by.
Hossein Mohebbi, a spokesperson for Iran's Revolutionary Guard Corps, said that the two countries had also reached an agreement over the sharing of control and revenues from the strait.
"Agreements have been reached on the share of each country in the waters of the strait and the share of Iran and Oman in its revenues," Mohebbi said.
While this helped ease market concerns, Iranian officials noted that the crucial waterway would remain closed until Washington meets Tehran's demands, which include lifting the naval blockade, removing all sanctions against the country and unfreezing its assets held abroad.
Meanwhile, traffic along the strait stood at 14 on Wednesday, according to data from ShipFinder.
Daniel Hynes, a senior commodity strategist at ANZ, highlighted the uncertain nature of the deal with Iran and Oman, noting that "it was unclear that the US would accept any deal that excludes it from control over the strait."
This comes at a time when European gas storage inventories languish at a seasonal low of 63.54% of capacity, compared to 76.24% 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 80.8%, according to the Swiss Federal Office of Energy.
Europe is also facing potentially severe weather across France and Central Europe, with forecasts of thunderstorms and 120km/h wind gusts on Thursday, Friday and Saturday, according to Severe-Weather EU.
This is expected to be modestly bearish for the region's natural gas demand over the course of the weekend, as it reduces energy demand linked to space cooling.