Wholesale natural gas prices in Europe and the UK fell on Friday, breaking a strong multi-day rise amid profit-taking by market participants. Nevertheless, the market closed the fifth straight week in the green: the expansion of the military conflict in the Middle East creates a threat to winter gas supplies.
The benchmark Dutch contract with the nearest delivery date fell by 2.5% — to about €77.60 per megawatt-hour (MWh). The pullback followed a five-day run of gains during which the contract hit €79.64 — the highest level since 2023.
For the week, the Dutch benchmark contract added 12.1%, recording a fifth consecutive week of growth.
In the UK, the equivalent wholesale NBP contract fell by 1.5% — to 195.00 pence per therm, after previously reaching multi-year highs near the 198 pence level. For the week, the British benchmark rose by 12.6%, also recording a fifth consecutive week of gains.
The Strait of Hormuz and increased Houthi activity heighten concerns over supplies
Despite modest profit-taking on Friday, wholesale gas quotes are still supported by a significant geopolitical risk premium stemming from the expansion of military operations in key maritime corridors in the Middle East.
Military clashes between US and Iranian forces significantly restricted tanker movement through the Strait of Hormuz — a strategically important chokepoint through which about 20% of global liquefied natural gas (LNG) supplies pass, mainly from Qatar.
Last week’s security crisis intensified following direct confrontations: US strikes on Iranian oil tankers and Iran’s missile strike on a US base in Jordan. Additional alarm was caused by the capture of the Yemeni port of Mocha by Iran-linked Houthi militants, which spread maritime risks to the Red Sea area.
Against the backdrop of oil prices staying above $108 per barrel, the threat of prolonged shipping restrictions in the Persian Gulf forced European gas consumers to aggressively compete with Asian importers for alternative LNG cargoes from the Atlantic basin.
Low gas storage levels in Europe compound winter risks
According to Gas Infrastructure Europe, underground gas storage is filled to approximately 67% — below the average seasonal level over the past five years.
Filling storage throughout August and the start of September was significantly hampered by a combination of several factors: intense summer heat waves, scheduled maintenance on Norwegian pipelines, and the structure of forward prices (backwardation), under which injecting gas into storage was unprofitable in the short term.
A prolonged multi-week rise in European gas prices was one of the key factors influencing the European Central Bank’s monetary policy decision on Thursday.
The ECB raised its deposit rate by 25 basis points — to 2.50%, making the second rate hike this year. The regulator cited sharp inflation risks from costs driven by higher energy input prices.