European natural gas prices plunged at opening on Monday after U.S. President Donald Trump said he had called off a planned attack on Iranian energy sites and talks on a deal would begin this week.
Europe’s benchmark natural gas prices, the Dutch TTF Natural Gas Futures, sank by 4% at the start of trade on Monday, following the 5% slump in oil prices amid renewed hopes that the U.S. and Iran are looking for a return to diplomacy.
However, natural gas prices eased their losses mid-day as Europe faces another heatwave that boosts electricity demand. The heatwave and a lack of rainfall have led to the lowest water levels of the Danube in nearly 90 years, which has forced Hungary and Romania to curb their respective nuclear power output of their plants that use the water from the river for cooling of the reactors.
Hungary would be shutting down on Monday the Paks Nuclear Power Plant, for the first time in 44 years, due to the continued drop in the water level of the Danube, Hungarian Prime Minister Peter Magyar said on Sunday.
While Europe’s own power woes are capping the downward pressure on the benchmark natural gas prices, renewed hopes for diplomacy in the U.S.-Iran conflict eased some concerns about the tight global LNG market. Qatari cargoes are not flowing freely yet out of the Persian Gulf via the Strait of Hormuz, but some kind of a temporary deal and halt to attacks on tankers could see more gas making its way out of the Middle East in the coming weeks.
In the tight global LNG market, Europe is currently losing the competition with Asia for spot LNG supply as Asian demand and prices are higher than the European ones.
Moreover, Europe is heading for the second-lowest level of gas storage for this time of year in 15 years and well below the five-year average, which has prompted a race against time to procure LNG for the winter.
By Michael Kern for Oilprice.com
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