Wholesale natural gas prices in Europe rebounded on Tuesday, recovering from earlier losses, as continued delays in shipping through the Strait of Hormuz reminded energy bureaus of the risks to existing supplies, despite ongoing diplomatic efforts to ease tensions in the Middle East.
The Dutch front-month contract on the TTF hub, the European benchmark, rose 1.87% to €58.58 per megawatt-hour (MWh) in mid-morning trading. The corresponding UK wholesale natural gas contract also climbed 1.95% to 143.77 pence per therm.
Tuesday's price rise followed a temporary dip on Monday, triggered by US President Donald Trump's announcement of direct negotiations with Iranian officials.
Although the prospect of diplomacy provided temporary relief to wider financial markets, European gas traders have turned their attention back to the reality of actual supplies, amid reports that the movement of liquefied natural gas tankers through the Strait of Hormuz continues to suffer from severe bottlenecks.
This new rebound reflects the underlying fragility of the market in the wake of an explosive July, which saw benchmark European gas prices surge by more than 30%, marking their first monthly gain in four months and their strongest performance since March.
Geopolitical friction has choked vital transit routes throughout the past month, disrupting flexible liquefied natural gas (LNG) shipments from Qatar, one of Europe's main suppliers during the summer.
Meanwhile, unusually hot weather in southern Europe has led to a surge in demand for cooling at its peak, forcing utilities to burn gas to generate electricity instead of pumping it into underground reservoirs.
As a result, gas storage facilities in the European Union entered August filled to about 55% of their capacity, significantly behind the five-year historical averages and well below the trajectory recorded in the same period last year.
With stockpiles falling short of target levels ahead of the official start of the winter heating season on November 1, analysts expect European gas prices to maintain a solid support level, making the market highly sensitive to any delays or setbacks in the anticipated diplomatic talks.
