Natural gas: Price downside limited – Commerzbank

Norman Liebke at Commerzbank argues that European gas prices may see only limited further declines despite a brief 8% drop on US–Iran diplomatic headlines. With the Strait of Hormuz officially closed, Qatari LNG flows remain at just 20% of pre-war levels, Asian prices are elevated, and European storage is well below average, raising the risk of emergency purchases and renewed price spikes.

LNG constraints and low storage

"Following news that US President Trump will speak with Iranian President Pezeshkian at today’s UN General Assembly, the gas price temporarily fell by more than 8%. However, downward pressure is likely to remain limited."

"As long as the Strait of Hormuz remains officially closed, only a small portion of Qatari LNG is reaching the global market. According to Bloomberg data, it currently stands at 20% of pre-war levels."

"Once the difference reaches EUR 6 per MWh, it becomes more attractive for US suppliers to ship their LNG to Asia instead of Europe due to the additional transportation costs. Since Europe is increasingly relying on LNG supplies in the winter due to low gas storage levels and as we approach the heating season, the price gap is unlikely to widen much further in order to prevent the diversion of LNG shipments."

"On average, these are now 70% full, which is about 15 percentage points below the five-year average. In Germany, however, gas storage facilities are filled to just under 57% (27.5 percentage points below the five-year average), which is why the federal government could discuss emergency purchases with Trading Hub Europe, the market area operator, this week and then, if necessary, authorize them. Should these purchases take place on a larger scale, the gas price could then rise more sharply again."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)