European Gas Prices Rise Amid Middle East Shipping Risks
European natural gas prices fluctuated in October as maritime security threats in the Persian Gulf and low storage levels clashed with U.S. diplomatic signals.
European wholesale natural gas prices experienced volatility in early October, driven by a combination of geopolitical instability in the Persian Gulf and concerns over winter heating demand. The benchmark Dutch TTF contract rose from 76.80 euros per megawatt-hour on October 7 to a peak of 80.59 euros on October 8, spurred by intensifying attacks on vessels in the Gulf and cooler weather forecasts for Northwestern Europe.
Prices eased slightly on October 9 after Donald Trump ruled out military strikes against Iran before the November congressional midterm elections, causing the Dutch contract to slip to 78.00 euros. Despite this brief retreat, prices remain elevated due to missile and drone strikes in the Strait of Hormuz, which have forced expensive tanker reroutings around Africa and increased insurance rates.
Supply pressures are acute as Middle Eastern LNG exports declined by 60 billion cubic metres between March and September due to the Iran war. While the Government of Qatar assembled a fleet of 12 empty tankers to potentially increase shipments, and the United States provided 17 billion cubic metres of additional production, UBS warns these offsets may be insufficient. European Union storage levels have hovered around 72% to 73%, which is roughly 15% below seasonal averages. UBS subsequently raised its fourth-quarter Dutch TTF price forecast to 75 euros per megawatt-hour, noting that prices could peak at 120 euros if disruptions persist during a cold winter.
