Hong Kong Stock Concept Tracking | European gas faces heavy pressure on both supply and demand sides to replenish stocks or raise the gas price center (with concept stocks)

The Zhitong Finance App learned that as the military conflict in the Middle East intensifies supply disruptions and is driven by urgent demand to replenish stocks before the winter heating season, gas prices in Europe have continued to rise, and prices have nearly tripled so far this year. If global supply continues to be tight, Europe will have to fight harder for supply during the heating season. Orient Securities released a research report saying that in the context of the restructuring of the global order and geographical conflict, the global energy price center is moving upward, and natural gas prices are expected to gradually enter a new upward cycle.

Recently, after a brief period of relative calm in the Middle East conflict, the tense atmosphere has once again heated up. Mutual attacks by Saudi and Yemeni armed forces have raised concerns that the Red Sea route will be blocked, and gas prices in both Europe and Asia have soared.

According to data from the London Intercontinental Exchange (ICE), European gas prices topped $1,000 per 1,000 cubic meters for the first time since December 2022 during Monday's trading session. Natural gas futures prices at the Dutch TTF hub in October rose to around US$1004 per thousand cubic meters, equivalent to 84.07 euros/megawatt-hour.

Meanwhile, the spot price of natural gas at major European trading hubs surpassed $1,000 per 1,000 cubic meters last week. Among them, the current spot price of the TTF hub reached 1005 US dollars, or 83.685 euros/megawatt-hour.

The Oxford Institute of Economics predicts that the average price of European gas in the fourth quarter of 2026 and the first quarter of 2027 could be close to 60 euros per megawatt hour. If the current wholesale price of natural gas remains unchanged, the overall inflation rate in the Eurozone for the second half of 2026 is likely to be close to 3.5%, which is slightly higher than the 3% level in its latest benchmark forecast.

The situation in the Middle East continues to impact market supply, making it difficult for natural gas transportation to fill the market gap. Before the war, about one-fifth of the world's crude oil and liquefied natural gas (LNG) were shipped to the global market via the Strait of Hormuz in the Middle East. Although some crude oil tankers still continue to navigate this key waterway, Qatar's LNG exports through the Strait of Hormuz have basically come to a standstill.

The UAE seems to be still loading LNG carriers in the Persian Gulf, but the overall volume is far below pre-war levels. The market is generally worried that if the situation escalates further, energy exports from the entire Gulf region will face the risk of being blocked on a wider scale.

The blockage of the Strait of Hormuz has had a major impact on liquefied natural gas exports from Qatar and the United Arab Emirates. The two countries' liquefied natural gas export capacity accounts for about 20% of global supply. Supply in the Gulf region has declined, leading to an increase in European “stock replenishment” costs.

This year, Europe's natural gas “replenishment” faces multiple pressures on both the supply and demand sides.

Low inventories have further exacerbated market concerns about insufficient supply. As the heating season gets closer, Europe is facing tremendous pressure to replenish its natural gas reserves. Currently, the overall filling rate of European gas storage facilities is only about 66%, the lowest level in the same period on record. Among them, the situation in Germany is particularly serious. The gas storage level is only 54%, which is far below the average for the same period in previous years.

HSBC (HSBC) predicts that by November 1, the share of European gas inventories will reach only 73%, the lowest level for the same period since data collection began in 2009.

Abnormally low inventories mean that even if the temperature is normal in winter, Europe may face a tight supply pattern. Once it experiences a cold wave or the situation in the Middle East continues to deteriorate, gas prices may soar further.

ING Groep NV strategists Warren Patterson and Ewa Manthey stated in this week's research report: “The escalation of the situation in the Persian Gulf has further delayed hopes for the recovery of LNG exports in the region.” They expect that as winter approaches, the battle for LNG between Europe and Asia will become more intense, “especially when Qatar's LNG is likely to continue to be absent from the market until the end of the year.”

Analysts at energy consulting agency Timera Energy warned that the direct result of low gas storage levels is “a weaker balance between supply and demand in winter,” adding, “This will amplify the potential for price fluctuations in the event of cold weather or a new round of supply shocks, and cargo ships may not be able to keep up with changes in demand at that time.”

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