02.07.202614:48 Forex Analysis & Reviews: Europe amid abnormal heat: energy demand rises, gas gets more expensive

European natural gas futures rose for a second consecutive session as mounting summer heat and renewed diplomatic tensions in the Middle East outweighed a brief easing of global supply disruptions and heightened supply concerns ahead of the autumn buying season.

The front-month contract for Dutch gas (the European benchmark) jumped 2.2% to trade at €43.43 per megawatt-hour (MWh) in early trading, remaining near a three-week high. The British equivalent added 1.8%, reaching 103.54 pence per therm.

A key catalyst was the sudden collapse of planned talks between US and Iranian officials in Doha, Qatar. The impasse revived worries about stability around the Strait of Hormuz — a crucial maritime corridor through which roughly 20% of global liquefied natural gas (LNG) traffic passes, much of it from Qatar.

Extreme seasonal heat across continental Europe is adding further pressure. Record temperatures are boosting electricity demand for air conditioning, forcing power plants to burn more gas.

The current gas rally follows second-quarter volatility, when benchmark prices fell more than 20% from a March peak above €73/MWh. That earlier correction was driven by a temporary de-escalation of Middle East tensions and seasonally lower heating demand after winter.

Nevertheless, fundamentals remain tight: regional gas storage is about 48% full, well below 56% a year ago and materially under the five-year average of 61%.

Because storage refill is proceeding more slowly than usual, any prolonged disruptions to global LNG supplies or continued summer heat could trigger another sharp price spike ahead of the autumn procurement season.