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EMEA Natural Gas Update: Futures Slide Despite Lingering Middle East, Hormuz Uncertainties

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European natural gas futures edged lower on Friday despite lingering uncertainties in the Middle East and the strategically crucial Strait of Hormuz.

Front-month Dutch TTF futures fell 1.25% to 70.915 euros ($82.34) per megawatt-hour, while UK NBP futures declined 0.97% to 176.270 British pence ($2.38) per therm. Both Dutch TTF and UK Gas were set to end the week up by 6.24% and 7.19%, respectively, according to TradingEconomics.

On Thursday, US Vice President JD Vance declined to offer a prospective timeline for ending the conflict between the US and Iran, which has been raging for over seven months.

Vance said that all options were still on the table against Iran, even as he ruled out talks with the country until Tehran stops attacks against commercial shipping along the Hormuz, according to a report by Al Jazeera.

Meanwhile, Iran's First Vice President Mohammad Reza Aref has warned that the country's response to US attacks will be "asymmetrical" and "multi-layered" going forward.

Traffic along the Strait of Hormuz, which accounted for one-fifth of global LNG flows, dipped to just 9 total transits on Thursday, according to data from ShipFinder.

Daniel Hynes, a senior commodity strategist at ANZ, noted that Qatar, the largest LNG exporter in the world, hadn't sent an LNG tanker through the strait since July, when one of its ships was hit by an Iranian missile, leading its Asian customers to look elsewhere for supplies.

This comes at a time when Europe continues to struggle with low inventories at 65.85% of capacity, compared to 78.29% 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 82.5%, according to the Swiss Federal Office of Energy.

However, the European Union's Gas Coordination Group noted on Thursday that there was "no immediate risk" to the region's gas supply security, even as it acknowledged that the situation remained "exceptional" and warranted "close monitoring."

Weather forecasts have also offered much-needed respite for the region, with a severe El Nino effect expected to result in a relatively mild winter across much of Europe, with less snow than normal across most lowland and mid-elevation areas, according to a report by Severe-Weather EU.

This is expected to ease demand for heating gas during the oncoming Winter, which remains constrained due to the ongoing conflict in the Middle East.

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