Natural gas prices in Europe reached the highest level since December 2022

Natural gas prices in Europe rose to 89.74 euros per megawatt hour, reaching the highest level since December 2022, due to the pressures brought by continued disruptions in maritime transport through the Strait of Hormuz and low pre-winter storage occupancy levels.

The megawatt-hour price of natural gas in November futures contracts traded in the Netherlands-based TTF, one of Europe's most important natural gas trading centers, closed at 88.04 euros yesterday.

Increasing tanker attacks and escalation of regional tensions in the Strait of Hormuz have increased concerns about liquefied natural gas (LNG) supply security. The megawatt-hour price of natural gas, which has been around 87 euros for the last week, increased by 1.90 percent compared to the previous closing, reaching 89.74 euros as of 12.23 today.

Warehouses are behind last year

Another factor that had an impact on prices was that the occupancy rate in Europe's natural gas tanks remained low compared to the same period last year. While consumption is expected to increase as the winter months approach, concerns about the capacity of existing stocks to meet winter demand also increase price pressure.

According to Gas Infrastructure Europe (GIE) data, the occupancy rate of natural gas tanks in the European Union countries is at 74.58 percent. This rate was recorded as 85 percent in the same period last year.

While maritime transport disruptions in the Strait of Hormuz make it difficult for Europe to replenish its natural gas stocks, the decline in LNG supply from the Middle East deepens the congestion in the global market.

Hormuz 'bottleneck'

The damage to the facilities of LNG producing countries in the region following the attacks launched by the USA and Israel against Iran in February and Iran's retaliation, also negatively affected the gas supply to Europe.

Although some LNG cargoes belonging to Qatar and the United Arab Emirates (UAE) have managed to pass through the Strait of Hormuz in recent weeks, it is stated that these shipments have not reached a level that would change the global LNG supply-demand balance.

However, it is stated that due to disruptions in the Strait of Hormuz, LNG flow is 80 percent below the levels seen before the war in Iran.