On Wednesday, November 11, the European natural gas market continued its rebound. Dutch TTF near-month futures rose further after gaining 2.7% in the previous trading day, reaching around €86 per megawatt-hour. The market weighed the uncertainty surrounding the Middle East conflict against the regional supply balance. Reports of tanker fires near the Strait of Hormuz continued, Iran denied any involvement in related negotiations, European LNG imports lagged behind the same period last year, winter inventories began to decline, and the supply balance was highly dependent on the speed at which traffic in the Strait of Hormuz recovered.

Continued price increases and market environment

Dutch TTF near-month futures, a benchmark for European natural gas, were quoted at €86.80 per megawatt-hour in early European trading on November 11, up 2.4%. Prices had previously retreated from highs exceeding €100 per megawatt-hour at the end of October, but after easing somewhat this month due to expectations of progress in peace negotiations, they remain high due to persistently tight market conditions. Prices in both Asia and Europe have recently risen to their highest levels since 2022, more than tripling since the beginning of the year. The conflict has forced nearly one-fifth of global liquefied natural gas exports out of the market, with Europe and Asia competing for limited supply pools. Continued disruptions to shipping through the Strait of Hormuz mean the speed of flow recovery in Qatar, a major exporter, is a key variable for winter balance. Price volatility reflects a combination of supply rigidity and seasonal demand, rather than being driven by a single factor.

The impact of Middle East conflicts on liquefied natural gas supplies

The Middle East conflict has persisted for months, restricting effective passage through the Strait of Hormuz. Qatar's main liquefied natural gas (LNG) facility in Ras Lafan has been damaged, reducing export capacity by approximately 17%, and force majeure continues. Global LNG supply is projected to decline by about 3% this year, approximately 20 billion cubic meters. Qatar Energy has extended its force majeure, with loading volumes far below pre-conflict levels. Mohsen Rezaei, Secretary of Iran's Supreme National Security Council, recently stated that the related negotiations were a complete lie, aimed at lowering oil prices, and emphasized that the reopening of the Strait of Hormuz requires seven conditions to be met. A tanker fire on the eastern side of the strait further increases shipping risks. Supply disruptions force Europe to compete with Asia for limited spot goods, challenging Qatar's traditionally reliable supply position. The pace of regional flow recovery will directly determine marginal supply during the winter.

Low European inventories and lagging imports

European underground gas storage facilities are experiencing unusually low inventory levels as the heating season approaches. As of early November, EU inventories stood at approximately 72%, far below the five-year average of around 90% for the same period, compared to approximately 58.5% in Germany and 63% in the Netherlands. Net withdrawals have begun, with a significant shortage in the core consumption region of Northwest Europe. LNG imports are lagging behind the same period last year, with Qatar's share declining sharply. While other sources, such as the US, have filled some of the gap, overall supply remains insufficient. The International Energy Agency (IEA) points out that low inventories could perpetuate the tight global market until 2027. Europe has sufficient LNG regasification capacity, but actual deliveries depend on global competition and strait accessibility. The weakened inventory buffer has increased reliance on spot imports, and winter demand fluctuations will amplify supply uncertainty.

The termination of long-term contracts highlights supply risks

Polish company Oren has terminated a long-term contract with Qatar Energy for 1 million tons of liquefied natural gas annually, originally scheduled to run until 2034. The company exercised its right to terminate the contract citing ongoing force majeure preventing performance, and the contract remains in effect for 60 days after notification. This is the first known termination of a long-term contract since the conflict began, highlighting the impact on the reliability of Qatari suppliers. Oren has retained another contract and stated that its production and other long-term agreements cover the group's needs. The contract termination reflects the buyer's response to long-term supply disruptions, rather than an immediate shortage. Europe as a whole still needs to adjust its supply balance through the spot market and other sources, and the process of supply diversification faces real constraints.

Frequently Asked Questions

Question 1: How does the Middle East conflict affect the balance of European gas supply? Answer: The conflict has restricted passage through the Strait of Hormuz, leading to a significant drop in Qatari LNG exports and a reduction in global supply by approximately one-fifth. Europe must compete with Asia for limited spot supply, and low winter inventories further amplify its dependence. Question 2: What do current European inventory levels mean? Answer: EU inventories are around 72%, significantly lower than historical levels for the same period, and even lower in core countries. Net withdrawals have already begun for the heating season, weakening buffer capacity and increasing marginal dependence on global LNG imports. Question 3: What are the market implications of Oren's termination of the Qatar contract? Answer: This is the first known termination of a long-term contract since the conflict, reflecting the continued impact of force majeure on commercial performance. It suggests buyers adjust their supply mix, but overall European supply still relies on diversified sources and the spot market.