European natural gas futures reversed earlier losses in after-hours trading Thursday after US inventory data showed unexpected global market tightness, while traders await signs on whether the US-Iran conflict could ease and eventually reopen the Strait of Hormuz.
Dutch TTF natural gas futures rose 0.907% to 44.30 euros ($52.10) per megawatt hour, while UK NBP contracts gained 1.339% to 109.00 British pence ($1.48) per therm.
Market sentiment was buoyed by word that the weekly US natural gas build was less than feared. The US Energy Information Administration said Thursday that domestic inventories built by 63 billion cubic feet, less than the near 80 Bcf expected by the market.
Prior to the inventory data, European sentiment softened amid reports that Washington and Tehran were moving toward a potential agreement to end hostilities. Iran is expected to respond within days to a reported one-page US memorandum proposal. The latest diplomatic push followed US President Donald Trump's brief suspension of an initiative intended to provide safe passage for vessels transiting the Strait of Hormuz.
Although most Persian Gulf LNG cargoes are destined for Asian buyers, the disruption has tightened global gas balances and heightened concerns in Europe, where countries are attempting to rebuild inventories ahead of the winter heating season.
However, European LNG imports declined year on year in March and April after gas prices surged in the wake of the Hormuz disruption. The downturn was particularly severe in the UK, where LNG imports fell 20% year-on-year during the two-month period, according to Vortexa data cited by Timera Energy on Thursday.
European gas storage sites were 34.07% full as of Wednesday, according to Gas Infrastructure Europe, trailing the 41.4% level recorded a year earlier.
"Concerns over a lengthy disruption have already seen some European traders hedge against a price spike next winter," ANZ analyst Daniel Hynes said.
Weather forecasts also remained in focus for gas markets.
Atmospheric G2 said in a social media post on Thursday that Europe is entering a cooler and more unsettled weather pattern, with below-normal temperatures expected in the coming weeks. The forecaster said stronger wind and hydropower generation could offset weaker solar output, although conditions are expected to remain variable.
In a separate post, Atmospheric G2 warned of increasing risks of summer heatwaves and drought across Europe, citing calmer Atlantic conditions and a strong El Nino pattern expected to persist into winter.