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LNG: Middle East Escalation Pushes Gas Prices Higher

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European LNG prices rose 2.1% on Friday to EUR 40.75, just below the intraday high of EUR 41.18, to be up 5.6% last week. Geopolitics remain a market driver with the situation in the Middle East deteriorating further but European storage levels at 94% is partially offsetting this. Events over the weekend indicate an escalation in tensions as Iran shut its airspace in preparation for a retaliatory strike from Israel and Israel continued to target Lebanon.

  • Israeli PM Netanyahu has promised a “strong” response to Iran’s missile attack on Israel last week and hasn’t ruled out attacking its oil and nuclear infrastructure. US President Biden discouraged strikes on Iran’s oil. The main risk is if Iran becomes more involved in the conflict and blocks the Strait of Hormuz which Qatar relies on for its LNG exports.
  • US natural gas fell 4.7% to $2.83 to be down 2.5% on the week. It has started today lower at $2.80. Milton has been classed as a hurricane and while Florida is preparing, it is not expected to threaten gas infrastructure. Other storms in the Gulf of Mexico and Atlantic currently look likely to also miss gas facilities.
  • US lower-48 gas production fell 1.4% y/y on Friday and demand rose only 0.3% y/y. The west is forecast to be warmer into mid-October, while the east should be cooler, according to the Commodity Weather Group.
  • North Asian gas prices followed Europe higher rising 1.5% on Friday to be up 1.3% last week and also include a geopolitical risk premium.
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European LNG prices rose 2.1% on Friday to EUR 40.75, just below the intraday high of EUR 41.18, to be up 5.6% last week. Geopolitics remain a market driver with the situation in the Middle East deteriorating further but European storage levels at 94% is partially offsetting this. Events over the weekend indicate an escalation in tensions as Iran shut its airspace in preparation for a retaliatory strike from Israel and Israel continued to target Lebanon.

  • Israeli PM Netanyahu has promised a “strong” response to Iran’s missile attack on Israel last week and hasn’t ruled out attacking its oil and nuclear infrastructure. US President Biden discouraged strikes on Iran’s oil. The main risk is if Iran becomes more involved in the conflict and blocks the Strait of Hormuz which Qatar relies on for its LNG exports.
  • US natural gas fell 4.7% to $2.83 to be down 2.5% on the week. It has started today lower at $2.80. Milton has been classed as a hurricane and while Florida is preparing, it is not expected to threaten gas infrastructure. Other storms in the Gulf of Mexico and Atlantic currently look likely to also miss gas facilities.
  • US lower-48 gas production fell 1.4% y/y on Friday and demand rose only 0.3% y/y. The west is forecast to be warmer into mid-October, while the east should be cooler, according to the Commodity Weather Group.
  • North Asian gas prices followed Europe higher rising 1.5% on Friday to be up 1.3% last week and also include a geopolitical risk premium.