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EMEA Natural Gas Update: Prices Jump as Iran Exits Peace Talks

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European natural gas futures extended gains on Monday after reports that Iran is halting peace negotiations with the US until its demands are met for an end to Israeli operations in Lebanon and Gaza, according to news outlets citing Iran's IRGC-affiliated Tasnim news agency.

The Dutch TTF front-month contract rose 6.106% to 48.81 euros ($56.74) per megawatt hour, while the UK NBP front-month contract gained 6.075% to 117.52 British pence ($1.58) per therm.

The rally followed earlier price strength after reports that US forces escalated operations against Iran over the weekend. Prices had eased last week on expectations of a peace agreement that ultimately failed to materialize. The Strait of Hormuz remains effectively closed for the 93rd consecutive day, restricting the flow of roughly 20% of global LNG.

Due to supply concerns, the Dutch government allocated $1.15 billion to secure gas supplies ahead of winter. Dutch storage levels stand at around 15% of capacity, compared with more than 36% a year earlier, according to Gas Infrastructure Europe. Across the EU, inventories are also weaker, with storage just above 40% versus 48% at the same point last year, GIE said.

Risks to supply are also building in Norway, where nearly 8% of offshore oil and gas workers are preparing to strike from Jun. 5 if state-brokered wage mediation fails this week, labor unions said on Monday, according to Reuters. The report said a breakdown in talks could lead to production curtailments affecting oil and gas output.

The increased competition for LNG supplies is coming from Asia. Just as a late-May heatwave in Europe lifted cooling demand, Statista on Monday said parts of Asia are also experiencing extreme temperatures, pushing up power consumption. Temperatures across China, Japan, and South Korea have remained well above seasonal averages since April. In India and Pakistan, daily highs have exceeded 46 degrees Celsius in multiple cities, with readings running 5-8 degrees Celsius above normal in some regions.

ANZ analyst Daniel Hynes said Monday that Indian buyers have been active in the spot market as surging electricity demand from heat has boosted gas consumption in recent weeks. He added that other Southeast Asian buyers have also increased spot purchases ahead of rising summer demand.

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