European natural gas settled at the highest level in a week as concerns that the conflict in the Middle East will widen and affect global flows of the vital fuel ahead of winter.
(Bloomberg) — European natural gas settled at the highest level in a week as concerns that the conflict in the Middle East will widen and affect global flows of the vital fuel ahead of winter.
Benchmark futures closed 1.9% higher, even as they declined on the week amid mild weather and high storage levels. Still, gas prices are more than 30% higher since before the Oct. 7 attack on Israel by Hamas.
Concerns are growing that the US could be pulled into a broader regional war in the Middle East. President Joe Biden appealed directly to the American people to support funding for Israel while leaders from around the region prepare to gather in Cairo for a summit. Hamas is deemed a terrorist organization by the US and European Union.
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The conflict has so far led to the shutdown of a major field supplying Egypt, raising questions over liquefied natural gas exports from the North African nation. Egypt’s share in Europe’s gas supply is not significant, but a wider conflict and potential Iranian involvement could increase security risks for Qatari LNG vessels in transit to the continent.
“The largest risk to the European and global balance concerns the potential escalation of the Hamas–Israel conflict to involve Iran and generate tensions over the use of the Strait of Hormuz,” Energy Aspects Ltd. said this week.
Such an involvement could also raise security risks for international gas pipelines in the region, according to think tank Brussels-based think tank Bruegel. The conflict could also have “knock-on effects on Europe’s liquefied natural gas supply as winter approaches,” Rystad Energy said in a note.
Dutch front-month futures, Europe’s gas benchmark, settled at €51.11 a megawatt-hour, the highest since Oct. 13.
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