(Bloomberg) — European natural gas prices erased gains as Iran appeared to downplay the impact of reported Israeli attacks and the risk of an immediate response from Tehran.
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Benchmark futures fell 2.9% after rising as much as 4.7% earlier on Friday. Prices remain on track for a second weekly increase.
According to two US officials, the attack came less than a week after Tehran’s rocket and drone fire on Israel. Early indications are that it was a “symbolic attack” that will not force Iran to respond aggressively, retired Israeli general Israel Ziv told the country’s Channel 12.
Read more: Energy analysts weigh the impact of Israel’s military strike on Iran
Yet rising geopolitical tensions – from Russian attacks on Ukrainian gas depots to an escalation of the conflict in the Middle East and its impact on key shipping lanes – are putting natural gas in the spotlight. Europe is more dependent than ever on global fuel flows, even as stockpiles are at record high seasonal levels.
“Major transit stops in the Strait of Hormuz pose a tail risk that could disrupt supply, threatening the EU-27’s robust storage capacity,” said Patricio Alvarez, a senior industry analyst at Bloomberg Intelligence.
Earlier this week, Energy Aspects Ltd. said. that a decision by Iran to close the Strait of Hormuz was “highly unlikely,” adding that a month-long halt to liquefied natural gas shipments by leading producer Qatar would reduce global supply by 6 million tons. That is almost a month of Western European LNG imports.
“Any disruption would hit Asia hardest, as most Qatari exports are sent to markets east of Suez,” the analysts wrote.
European LNG imports are already hovering below seasonal averages as Asian demand for super-cooled fuel increased. Energy Aspects lowered the LNG import forecast for the period April-October, the time when injections into underground storage locations take place.
Dutch front-month futures, the European gas benchmark, fell 2.7% to €31.45 per megawatt hour at 12:02 p.m. in Amsterdam. That brought this week’s gain to about 2%.
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