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EMEA Natural Gas Update: Prices Ease, but Tight Inventories and LNG Competition Keep Market Under Pressure

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European natural gas prices edged lower on Thursday, though concerns over depleted storage levels and intensifying global competition for liquefied natural gas supplies continued to support the market.

The front-month Dutch TTF gas contract declined by 0.955% to 61.940 euros ($70.48) per megawatt-hour, while the front-month UK NBP contract lost 1.043% to trade at 149.850 British pence ($2.00) per therm.

Goldman Sachs raised its TTF price forecasts for the third and fourth quarters of this year earlier this week, citing continued uncertainty linked to the conflict in the Persian Gulf which has tightened global LNG supplies and caused prices to soar. The bank lifted its projections to 60 euros/MWh for the third quarter and 53 euros/MWh for the fourth quarter, from previous forecasts of 41 and 40 euros respectively.

European gas storage levels remain a key concern. Inventories are currently at 54.38% of capacity, well below the 65.36% level recorded during the same period last year, according to data from Gas Infrastructure Europe. Storage levels are also significantly below the five-year average of 70% for this time of year, according to the Swiss Federal Office of Energy.

Equinor told Reuters earlier this week that European gas stocks are at their second-lowest level in 15 years, highlighting the challenge facing the region as it prepares for the next heating season.

RBC said the key variable regarding refilling inventories remains the full reopening of the Strait of Hormuz; however, its analysis suggests that even then Europe might still struggle to hit its mandated storage target ahead of winter.

Meanwhile, competition for LNG cargoes has intensified in Asia as buyers seek alternative supplies amid disruptions in the Gulf region. Japan's wholesale electricity prices have risen to their highest level in three and a half years, while Pakistan has been paying record prices for spot LNG cargoes. India has also accelerated long-term LNG contracting as buyers compete for available volumes, according to OilPrice.com.

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