European benchmark natural gas prices erased an early 3% loss at Monday opening and were up by 1.3% in morning trade in Amsterdam, as the commodity markets watch with apprehension the latest U.S.-Iran standoff at the Strait of Hormuz.
The front-month contract of the Dutch TTF Natural Gas Futures, the European benchmark for gas trading, was up by 1.3% at $39.67 (46.48 euros) per megawatt-hour (MWh) on Monday.
Prices dipped by nearly 3% at opening on Monday after U.S. President Donald Trump announced the U.S. would guide ships through the Strait of Hormuz. But the futures reversed the loss and gained more than 1% after Iran warned the U.S. against attempting to approach or enter the Strait of Hormuz.
The market is also uncertain how guiding the vessels would take place.
“Reports indicate that, for now, the plan won’t involve the US Navy escorting vessels. Even if this allows vessels to leave the Persian Gulf, we’re likely to see little inbound traffic,” ING’s commodities strategists Warren Patterson and Ewa Manthey said on Monday.
“This would only amount to temporary relief, as floating storage leaves the Persian Gulf,” they added.
The closure of the Strait of Hormuz has choked off nearly 20% of global daily LNG flows, as all of Qatar and UAE’s shipments are blocked.
Qatar’s LNG is not only trapped in the Strait of Hormuz, for now, but its key liquefaction complex Ras Laffan, the world’s largest, sustained extensive damage in an Iranian missile strike in the middle of March. The strikes and damage have forced Qatar to shut in production and repairs could take up to five years to complete.
In this situation, Europe remains exposed to gas price volatility in the refilling season, which could prove more difficult and much more expensive to complete ahead of the next winter. The TTF futures prices have dropped off the highs seen in March, but prices are still about 40% higher than where they were before the war in the Middle East began.
By Tsvetana Paraskova for Oilprice.com
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