“Hot Week”: Gas at Two-Month High

Japan's demand for liquefied natural gas is growing

European gas futures rose about 5% to 30.94 euros per megawatt-hour in the Dutch TTF hub, hitting the highest level in two months. Traders’ fears were fueled by the expected expiration of the agreement between Russia and Ukraine on the transit of Russian gas to Europe at the end of 2024, mutual attacks on Ukrainian and Russian energy facilities, and escalating tensions between Iran and Israel in the Middle East.

Oil and gas power plants are increasingly targeted by drones and missiles, both in Russian attacks and those launched by Ukraine, which in recent months has managed to hit several Russian oil refineries as far as 1300 kilometers from the front line.

In addition, oil prices also remained at a six-month high amid growing concerns over a potential widening conflict in the Middle East. A “tough response” by Iran to the air attack attributed to Israel on the Iranian consulate in Damascus, Syria, is expected at any moment.

As for liquefied natural gas (LNG), it was Japanese traders who stepped up the pressure and dragged prices up, which accelerated the replenishment of strategic reserves during the week (April 8-14, 2024), competing with Europe for global supplies that are becoming increasingly intense.

For the moment, however, the European gas market is still well supplied, as evidenced by the level of reserves, which are currently at a record high of 60.87% of maximum capacity. Bearish factors could weigh on the gas market in the second half of April, including forecasts of a hotter-than-normal summer season, increased wind power generation, steady nuclear power production in France, and rising gas supplies from Norway.