Gas Prices Follow Markets Lower But Geopolitical Worries Persist

Natural gas prices were weaker on Monday driven by recession fears which saw risk assets sell off. A recession would reduce energy demand significantly. However, markets have a better risk tone today with US equity futures higher. Tensions in the Middle East persist with a base in Iraq attacked and the US informing the G7 that Iran is likely to retaliate soon.

• Qatar, 3^rd largest LNG exporter, depends on Iran’s Strait of Hormuz for its shipping and any disruptions would impact global gas supplies significantly. Israel is also a gas producer.
• European LNG prices fell 2.3% to EUR 35.82 after a low of EUR 34.75. Solid US July PMI/ISM data helped markets recover somewhat.
• US natural gas fell 0.7% to $1.95 but is already 1.7% higher today to $1.97 supported by the recovery in risk appetite and ongoing geopolitical uncertainty in the Middle East. Downward pressure on prices is likely to remain though with inventories above the 5-year average and cooler weather continuing.
• North Asian prices fell 2.8%, as satellite footage showed Russia’s US sanctioned Arctic 2 LNG project loading gas, according to Bloomberg. Asia has continued to purchase Russian energy and the project should add to supply options especially while demand is strong.