Escalating conflicts in the Middle East are heightening market concerns over potential disruptions to global natural gas supplies, driving European gas prices to their longest daily winning streak in eight years.
Qatar, the world's second-largest exporter of liquefied natural gas (LNG), plans to extend the force majeure status on its LNG cargoes until mid-October. Following the intensification of hostilities in the Middle East, the market no longer expects a substantial recovery in shipping through the region's waters in the near term.
The benchmark European natural gas futures have surged nearly 47% this month, with prices now almost double those of a year ago. Crude oil futures also moved higher on Thursday, after Iran-aligned Houthi forces claimed attacks on two Saudi oil tankers in the Red Sea, opening a new front in the conflict.
A core concern in the European market is the pace of refilling gas storage facilities ahead of the winter season. These reserves are a critical buffer against surging demand during the colder months. Storage levels were already unusually low at the end of the last heating season, and the current refilling rate is lagging behind last year's pace. Due to geopolitical tensions, Europe is now forced to compete with Asia and other regions for a limited pool of available LNG supplies.
Current European gas storage is only 54% full, compared to a five-year average of 70% for this time of year. LNG imports into the region have been declining since April. Meanwhile, extreme summer heat in South Asia has prompted local buyers to aggressively purchase LNG cargoes at high prices, diverting supplies that might otherwise have flowed to Europe.
In its financial report on Thursday, TotalEnergies stated, "Persistent tensions in the Middle East, where conflicts could impact Qatari LNG capacity—which accounts for nearly 20% of the global market—combined with competition for LNG supplies between Europe and Asia, will support gas prices in the coming months."
The benchmark Dutch front-month natural gas futures rose 1.4% to 63.40 euros per megawatt-hour. Over just the past nine trading sessions, the contract has gained approximately 30%, with intraday prices nearing highs last seen in March. Wednesday's closing price marked the highest settlement in three years.