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EMEA Natural Gas Update: Futures Rise as Heatwave Raises Power Demand

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European natural gas futures rallied on Thursday, as increased power consumption due to the ongoing heatwave offset bearish sentiments from the normalization of transits via the Strait of Hormuz.

The front-month Dutch TTF contract was up 2.28% to 43.755 euros ($50.07) per megawatt-hour, while the UK front-month NBP contract was up 2.22% to 103.950 British pence ($1.39) per therm.

Europe continued to experience an unprecedented heatwave, which has already "obliterated June and all-time high temperature records" across the UK, France, Germany and Switzerland, and is now set to move eastward over the coming days, according to Severe Weather EU.

As such, markets expect increased space cooling demand across the continent, which in turn leads to higher natural gas-fired power burn.

To make matters worse, the US, the largest European LNG supplier is forecast to experience above-normal temperatures, leading to higher domestic demand, and potentially lessening gas availability for export.

The rise shrugged off bearish pressure from increased movements in the Strait of Hormuz, where vessel traffic rebounded sharply, with 42 ships transiting the waterway over the past 24 hours, according to the Hormuz Strait Monitor.

This comes after Qatar, one of the mediators, reported "positive progress" during indirect technical talks held between Iran and the US in Doha on Wednesday.

Tehran also said that it would be establishing a communication channel with Washington to report and discuss breaches of the interim deal, according to a report by Al Jazeera.

According to Daniel Hynes, a senior commodity strategist at ANZ, global LNG exports rose in June, "to their highest level since March" as Middle Eastern producers began aggressively loading vessels after initial peace talks began.

European gas inventories stood at 48.87% of capacity, compared to 56% during the corresponding period a year ago, according to data from Gas Infrastructure Europe.

Inventories were significantly below the five-year average for this period, at 63.8%, according to the Swiss Federal Office of Energy.

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