Menelaus Ledrius, Secretary-General of the International Gas Union, said global gas markets are increasingly taking into account continued supply tightness beyond the winter as the war on Iran disrupts liquefied natural gas exports from the Gulf region and complicates Europe's efforts to rebuild its gas reserves.
These expectations come at a time when Europe is competing with Asia for liquefied natural gas shipments, in an attempt to refill storage facilities before the arrival of winter, amid a state of uncertainty that still persists regarding the impact of the conflict on exports from Qatar, one of the largest suppliers of liquefied natural gas in the world.
Yedrios stated that gas futures prices indicate that traders expect prices to continue to rise and the risks that threaten supplies until next summer before they begin to decline. EU member states represent more than 90 percent of the global gas market.
“The market currently indicates expectations that the conflict will continue for a longer period,” Yedrios said, according to Reuters.
He pointed out that the current futures contract curves indicate that the markets expect the scarcity of supplies to continue until next year, in a noticeable shift from what was the situation a few months ago when traders expected prices to decline after the winter.
Yedrios continued: “Europe has begun to outbid Asia because it needs to refill storage facilities,” explaining that the current crisis differs from the one that followed the Russian-Ukrainian war in 2022 because it affects several regions at the same time.
He added: “There is some decline in demand in the short term. The question is: Will demand recover after the situation stabilizes, or will there be some long-term policy implications?
The ban that Europe intends to impose on imports of Russian liquefied natural gas, starting in January, would exacerbate the uncertainty.
Russian cargoes currently destined for Europe are likely to find alternative buyers, but perhaps at lower prices. Yedrios said that any disruption in these flows would increase pressure on a market that already has concerns about Middle Eastern supplies.
A member of the European Central Bank's Board of Governors, Governor of the Irish Central Bank, Gabriel Makhlouf, said that the bank may have to raise interest rates again if rising energy prices lead to the transfer of inflationary pressures to other sectors.
Makhlouf added, in an interview with the Irish Radio and Television Corporation “RTE,” that inflation is still higher than the bank’s target, but there are still no indications of what is known as “second-order inflationary effects,” which lead to the transfer of high energy prices to the prices of other goods and services.
He said: “If this happens, and energy prices remain high and its effects spread to other sectors, we will have to take measures again” to ensure that the inflation target is achieved.
Makhlouf had warned earlier this month, after the European Central Bank raised interest rates for the second time this year, that making additional large increases could harm economic growth.
Oil prices rose during the second half of Wednesday's session, with Brent crude exceeding the $100 level again, after the markets recently breathed a sigh of relief at the possibility of reopening the Strait of Hormuz to international maritime traffic, and pumping Saudi oil production to the markets.
By 12:43 GMT, Brent crude recorded an increase of about 1.03 percent in the spot market, reaching $100.27 per barrel, while West Texas Intermediate (American) crude recorded an increase of 0.25 percent, reaching $90.76 per barrel.
In the previous session, Brent crude had fallen to its lowest levels since September 8, recording $97.36 per barrel, while US crude touched its lowest level since September 1, earlier in Wednesday’s session.
Improved crude supplies from the Gulf region put pressure on the market, while diesel refining margins reached a record level, amid the possibility of imposing restrictions on US diesel exports.
The price premium for European low-sulfur diesel fuel over Brent futures contracts reached a record level of nearly $95 per barrel, after US President Donald Trump said that he supports the idea of banning diesel exports in order to reduce prices, which have reached record levels due to a shortage of global supplies.
Analysts and market observers warned that such a measure would not contribute much to alleviating the rise in energy prices, and could exacerbate supply disruptions and economic conditions around the world.
Europe has become largely dependent on imports of diesel and jet fuel from the United States since the US-Israeli war on Iran led to the disruption of supplies from the Middle East.
