European Gas Posts Second Weekly Loss as Mideast Tensions Ease

European natural gas prices rose modestly on Friday but finished the week lower for the second straight week, as signs of diplomatic progress in the Middle East continued to unwind the geopolitical risk premium that had recently roiled energy markets.

Weekly Decline Amid Daily Gains

The benchmark Dutch front-month contract, a key indicator for European gas prices, gained 0.5% on Friday to settle around €57.50 per megawatt-hour, according to Investing.com data. The minor uptick followed a dip to three-week lows earlier in the week.

Despite the session's gain, the contract posted a weekly loss of approximately 2.5%. This marks the second consecutive weekly drop, reflecting an easing of investor anxiety over potential supply disruptions from the Persian Gulf.

Diplomatic Efforts Cool Markets

The recent price pullback is largely attributed to reports of ongoing mediation by Oman and Qatar. These efforts are aimed at establishing safe maritime corridors through the Strait of Hormuz, a critical chokepoint for global energy shipments. This has prompted traders to dial back expectations of an immediate supply shock.

A concurrent slide in global crude oil benchmarks over the past two weeks has also helped to reduce overall volatility in the energy complex, contributing to the calmer tone in gas markets.

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Tight Physical Market Provides Support

However, underlying supply constraints are preventing a more significant price decline. Analysts note that while diplomatic channels are active, liquefied natural gas (LNG) vessel traffic through the Strait of Hormuz remains heavily restricted. These shipping delays are slowing the arrival of crucial spot cargoes from major producers like Qatar.

The logistical bottleneck is occurring as European utilities race to replenish inventories ahead of the winter heating season. Current storage levels are a key point of concern:

• European Union gas storage facilities are filled to just 55% to 57% of capacity.
• This is significantly below the five-year average of roughly 71% for this time of year.

Unseasonably high summer temperatures across southern Europe have further strained the situation by boosting demand for gas-fired power generation. With Europe competing with Asian buyers for available LNG, market participants expect prices to remain sensitive to any geopolitical setbacks.