Quick overview

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European natural gas futures continued to rise, adding anxiety to an already erratic market as traders watched the US and Iran trade threats over the Strait of Hormuz.

Early trading saw benchmark contracts rise more than 5%, reversing the decline from the previous session. Iran threatened to attack vital infrastructure throughout the Middle East if US President Donald Trump followed through on his two-day deadline to reopen Hormuz or have its power plants bombed on Saturday.

There is no indication that the conflict will lessen as it enters its fourth week. This month, nearly 20% of the world’s liquefied natural gas flows have been cut off by shipping through Hormuz, and the largest LNG plant in Qatar has been shut down, with roughly 17% of its capacity damaged. The nation has stated that it might take five years to get back to pre-war levels.

Given a greater detrimental effect on the world’s LNG supply, gas prices in Europe and Asia might need to “rally further,” according to Goldman Sachs Group Inc. Samantha Dart and other analysts stated in a note on Sunday. They further raised their price projections, stating that “last week’s widespread attacks on energy infrastructure in the Middle East suggest that energy supply disruptions will last longer than we previously expected.”

Traders are also keeping a close eye on gas stockpiling on the continent because Europe needs a lot of LNG this year to replenish its depleted stockpiles.

The European Union’s energy chief has advised member states to begin filling gas storage early to prevent supply competition during the summer. Energy Commissioner Dan Jorgensen wrote in a letter that governments should also reduce their storage filling targets to 80% and maximize the flexibilities provided by EU law.