Europe Gas-Prices firm on stalled Iran-U.S. diplomacy, low stocks

Benchmark Dutch and British wholesale gas prices firmed on Friday morning amid a lack of diplomacy between the United States and Iran to support an opening of the Strait of Hormuz and rising concerns over European winter gas supply.

The benchmark Dutch front-month contract at the TTF hub rose by €0.85 to €69.00 per megawatt hour (MWh) by 0809 GMT, ICE data showed. The British front-month contract rose by 2.53 pence to 171.02 pence per therm.

The United States has said it is not talking with Iran and, according to a report in the Wall Street Journal, has no interest in reviving the June memorandum of understanding.

Iranian Foreign Minister Abbas Araqchi said putting diplomacy back on track was not impossible but hinged on the United States understanding that pressure does not work.

For the oil and gas markets, the reopening of the Strait of Hormuz is the main development to watch, but the latest news supports a “closed for longer” scenario, said Arne Lohmann Rasmussen, chief analyst at Global Risk Management (GRM).

Unlike oil, which is still seeing some transits, very little liquefied natural gas (LNG) is currently making it out through the Strait of Hormuz, he added.

"As the days and weeks pass without any developments, the fundamental situation on the European gas market turns increasingly critical, with storage levels already well below average heading into autumn," analysts at Mind Energy said.

EU gas stocks are 61.1% full – the lowest for this time of year in records going back to 2011 and 12.5 percentage points behind last year’s level, data from Gas Infrastructure Europe shows.

Meanwhile, Norwegian gas production is facing one last maintenance bout ahead of the winter.

"While much of the planned maintenance is already priced into the market, any unplanned outages would pose a greater bullish risk given the combination of low storage levels and restricted LNG availability," LSEG analyst Wayne Bryan said.