Easing tensions between the US and Iran have reduced the geopolitical risk premium in global natural gas markets, Rystad Energy said in a note on Wednesday, while also warning that extreme summer heat across Europe and Asia, coupled with lingering supply threats, is keeping prices supported.
"Gas markets are being pulled in two directions at the moment, balancing weather-driven demand against escalating geopolitical risks," Rystad analyst Antonia Syn said.
US President Donald Trump's decision to shelve planned military strikes on Iran in favor of renewed diplomatic efforts has eased immediate market concerns. However, Iran's denial that talks are underway, together with recent attacks on LNG infrastructure, means traders remain highly sensitive to further geopolitical developments, Syn said.
The Dutch TTF September natural gas contract settled at $19.40 per million British thermal units on Aug. 3, down 1.4% from a week earlier, while the East Asian LNG price for October delivery rose 0.4% to $20.40/MMBtu.
In Europe, an extended heatwave is driving higher cooling demand and supporting gas-fired power generation. Rystad said temperatures are expected to remain well above seasonal norms, while Hungary's temporary shutdown of the Paks nuclear power plant has increased reliance on gas-fired electricity.
Supply risks also persist. Unplanned outages at several Norwegian gas fields have reduced pipeline exports, while a drone strike on Egypt's Damietta LNG terminal damaged two floating LNG vessels, limiting the country's import capacity during peak summer demand.
In Asia, above-average temperatures forecast for Japan and South Korea are expected to increase LNG demand as utilities draw down inventories. Additional spot buying has also emerged from Bangladesh, India, Thailand and Taiwan, although cooler conditions and stronger hydropower generation in southern China could temper regional gas consumption.
In the US, Henry Hub prices were broadly unchanged at around $2.77/MMBtu as stronger power-sector demand from hotter weather offset robust gas production and weaker LNG feedgas demand. Rystad said ample supply and continued storage injections should limit price gains despite rising cooling demand.