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EMEA Natural Gas Update: Futures Slide After US-Iran Deal, Qatar Claim to Restore Output

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European natural gas futures edged lower on Tuesday, as markets expect the upcoming deal between the US and Iran to fully reopen the Strait of Hormuz.

The Dutch TTF front-month contract dropped 0.37% to 42.35 euros ($49.13) per megawatt-hour, while the UK NBP front-month contract was down 0.47% to 100.54 British pence ($1.35) per therm.

Even as markets continue to await additional details regarding the peace deal between the two countries, an interim accord is set to be signed in Switzerland on Friday, according to Pakistan's Prime Minister Shehbaz Sharif, in a post on X.

At the same time, Qatar, the world's largest LNG supplier, has announced that it plans to restore half of its output within a month of the strait reopening, and 80% within two months, according to a Bloomberg report, citing officials familiar with the matter.

Meanwhile, the strategically crucial Strait of Hormuz, which accounted for one-fifth of global LNG flows, remained effectively shut for the 16th week running, with just two vessels transiting over the past 24 hours, according to the Hormuz Strait Monitor.

Daniel Hynes, a senior commodity strategist at ANZ, has warned that "the resumption of traffic through Hormuz" will be challenging, while noting that concerns continued to persist among shipping executives, amid the lack of clarity on the deal.

Geopolitical strategist Cyril Widdershoven, a Senior Advisor at Blue Water Strategy, echoed similar concerns toon Monday, saying that while this agreement improves the outlook from a few weeks ago, it should not be "confused with normalization."

Widdershoven highlighted persistent concerns regarding "mines, unexploded ordnance, vessel tracking security, electronic interference, and broader regional risks," which he said will continue to influence operating decisions.

This comes at a time when European natural gas inventories remain depleted, at just 44.72% of capacity, compared to 53.40% 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 59.00%, according to the Swiss Federal Office of Energy.

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