European benchmark natural gas prices on Friday headed for their fourth consecutive weekly gain as the re-escalation in the Middle East dampened hopes that LNG flows from the Strait of Hormuz could normalize soon.
The front-month price at the Dutch Title Transfer Facility (TTF), the benchmark for Europe’s gas trading, was basically flat in early morning trade in Amsterdam on Friday, but it was on track for a 7% jump this week alone.
This week, the re-escalation of hostilities between the United States and Iran intensified concerns about LNG supply from the Middle East and sent Europe’s benchmark gas prices to their highest level since January 2023.
The renewed hostilities and the still-blocked Strait of Hormuz for LNG traffic is tightening global gas markets, where Asia and Europe are competing for a shrinking pool of supply to fill storage ahead of the coming winter.
Europe is heading into winter with one of the lowest levels of gas in storage in the past two decades as the war in the Middle East crippled LNG supply from Qatar, sent gas and LNG prices in Europe and Asia skyrocketing, and intensified competition for readily available global LNG cargoes that don’t need to cross geopolitically charged chokepoints.
“The potential for a global ‘fight for fuel’ is there, particularly in a colder winter,” Go Katayama, principal insight analyst for LNG at intelligence firm Kpler, told Bloomberg earlier this week.
In a sign of intensifying competition, Asia’s spot LNG price surged this week to the highest level since 2022.
Amid the strengthening Asian LNG prices, the JKM-TTF spread widened again, “making it less clear whether flexible cargoes should continue to be sent to Europe,” ING commodities strategists Warren Patterson and Ewa Manthey wrote in a note on Friday.
Earlier this week, ING’s strategists said that “As we move closer to the Northern Hemisphere winter, competition between the two regions is likely to pick up, particularly if Qatari LNG remains largely absent from the market through year-end.”
By Tsvetana Paraskova for Oilprice.com
