Gas Price Downside Limited by LNG Constraints and Low Storage
Natural gas prices may not decline further despite the recent drop, according to Norman Liebke at Commerzbank. A brief 8% fall in price occurred after news that US President Trump would speak with Iranian President Pezeshkian at the UN General Assembly. However, downward pressure on prices is likely to remain limited due to the ongoing closure of the Strait of Hormuz.
The strait's closure has significantly reduced Qatari LNG flows to just 20% of pre-war levels. This has led to elevated Asian prices and raised concerns about emergency purchases in Europe, where storage facilities are below average. In Germany, gas storage is filled to only 57%, 27.5 percentage points below the five-year average.
Liebke notes that once the price difference between European and Asian LNG reaches EUR 6 per MWh, it becomes more attractive for US suppliers to ship their LNG to Asia instead of Europe due to transportation costs. This would prevent a significant widening of the price gap in Europe, which is relying on LNG supplies during the winter months.