European Gas Steady as Traders Mull Middle East Tension, Ukraine

Jonathan Maxwell, CEO and co-founder of Sustainable Development Capital, discusses the war in Ukraine and how energy capture is at the center of Russia’s ambitions.

European natural gas traded in a narrow range as the market adopted a wait-and-see approach to renewed Middle East tensions and developments around the war in Ukraine.
Benchmark futures hovered near €33 a megawatt-hour after fluctuating earlier. The geopolitical risks — Israel’s strike on Qatar targeting Hamas leaders and Poland’s shooting down of Russian drones that crossed its territory during strikes on Ukraine — do not appear to pose an immediate threat to global energy flows.
President Donald Trump has expressed unhappiness about the Israeli attack. For some, that’s a signal the conflict should not expand, lowering the threat of disruption in the Strait of Hormuz — a key waterway for about a fifth of global LNG trade.
Still, traders are keeping a close watch on the developments as Europe is weeks away from its heating season, when gas demand normally doubles. The continent is heavily reliant on global liquefied natural gas flows and vulnerable to disruptions.
“Geopolitics is at the most difficult it has been in the long time,” Vitol Chief Executive Officer Russell Hardy said at the Gastech conference in Milan. “It’s very difficult at the moment to navigate the political picture and we will have more of that in the next six months.”
So far, LNG demand in parts of Asia has been muted and Europe has managed to attract enough cargoes to get its underground gas storage sites nearly 80% full — enough to meet recently relaxed mandatory targets. That’s kept prices in check despite curbed pipeline flows from Norway and Algeria amid maintenance.

“Europe has proved to be very, very resilient in managing its access to supply,” Christina Verchere, chief executive of Romania’s oil and gas company OMV Petrom, said in an interview at the conference in Milan. But much will depend “on winter and how it will be.”

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