European natural gas contracts held steady on Thursday, off one-week lows, as diplomatic progress over shipping through the Strait of Hormuz paused the recent selloff. Storage across the bloc still sits well behind schedule for the coming heating season, keeping a risk premium in prices.
Gas hubs pause after Wednesday's selloff
European gas contracts stabilized Thursday, holding steady off the one-week lows touched in the previous session, as traders weighed diplomatic progress in the Persian Gulf against a persistent shortfall in domestic storage injections. The benchmark Dutch front-month contract traded virtually flat at 65.61 euro per megawatt-hour, while British wholesale gas futures similarly hovered near the flatline, holding at 160.50 pence per therm.
The main factor behind the pause was a broader halt in the energy-wide commodity selloff, as markets digested diplomatic maneuvers in the Middle East. Wholesale gas prices had dropped 3% on Wednesday alongside a sharp pullback in global crude oil, driven by reports that Washington and Tehran were progressing toward an interim ceasefire agreement that includes explicit protections for commercial shipping through the Strait of Hormuz.
Qatari mediation and a floor under Brent
Sentiment drew further support on Thursday from news that Qatar's Prime Minister traveled to Tehran to help mediate negotiations aimed at restoring unhindered maritime transit. Brent crude found a floor around $87.40 a barrel after four consecutive sessions of decline, and energy traders pulled back from aggressive short-selling to wait for concrete confirmation of restored seaborne LNG and crude flows.
Despite the temporary relief from diplomatic headlines, Europe's underlying supply framework remains constrained heading into the autumn heating season.
Storage still running behind schedule
Data from Gas Infrastructure Europe shows underground storage facilities across the bloc hovering near 62% capacity. Elevated summer power generation demand from intense continental heatwaves, combined with delayed Qatari LNG cargoes, has hampered the seasonal storage injection rate.
Analyst commentary from ING notes that with regional storage injections running well behind schedule, European gas hubs will likely struggle to reach the EU's mandated targets before cold weather sets in, keeping a structural risk premium in prices through the 2026/27 winter. While European utilities continue to compete with Asian buyers for spot LNG cargoes, high inventories in the United States offer a potential buffer: according to UBS research, U.S. gas stockpiles stand nearly 8% above their five-year average, supported by strong domestic production. As new American export terminals and pipeline infrastructure complete commissioning toward the end of the year, increased U.S. LNG export capacity is expected to help ease structural deficits in Western Europe, provided shipping lanes through major maritime choke points remain open and secure.
Source: Investing.com
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