Dutch TTF Gas Steady as Easing Hormuz Risks Cap Rally

Key Moments

Benchmark Contracts Hover Near Recent Lows

European and UK wholesale natural gas futures traded sideways near three-week lows on Wednesday, as markets absorbed a steep pullback from earlier in the week. Trading desks weighed tentative signs of reduced naval tensions in the Middle East against still-tight winter storage levels across Europe.

The benchmark Dutch front-month TTF contract slipped 0.6% to 72.90 euros per megawatt-hour (MWh), holding at its weakest valuation since early September.

In the UK, the comparable NBP wholesale gas contract moved in the opposite direction, edging up 0.4% to 183.00 pence per therm. Despite the modest uptick, the contract remained anchored near multi-week lows.

Tehran Signals Conditional Strait of Hormuz Reopening

Sentiment across energy exchanges improved after senior Iranian representatives indicated that Tehran could move to reopen the Strait of Hormuz to commercial traffic within seven days.

Officials in Tehran, however, stressed that any easing of maritime restrictions would depend on Washington removing its naval blockade of Iranian ports and reducing military pressure in the broader region.

The potential path out of the seven-month conflict, together with extended discussions between U.S. and Iranian officials in New York, has led commodity traders to quickly scale back geopolitical risk premiums that had previously driven gas and crude benchmarks to multi-month highs earlier in the month.

European Storage Levels Remain a Key Concern

Data from Gas Infrastructure Europe (GIE) showed that underground gas storage facilities across the European Union were around 70% full.

Although stocks have been gradually replenished, they remained about 12 percentage points below levels recorded one year earlier. This leaves European utilities with relatively thin protection against a drawn-out winter cold spell or abrupt supply disruptions.

ECB Flags Faster Pass-Through to Consumer Prices

The European Central Bank reiterated this week that changes in the post-2022 energy market structure have accelerated the transmission of wholesale gas price swings into consumer inflation. According to the ECB, wholesale gas spikes now filter through to retail prices within 1 to 3 months in most euro area economies.

This shorter pass-through period keeps pressure on central banks to maintain a restrictive stance on interest rates in order to contain inflation risks stemming from energy markets.