EUROPE GAS - European gas prices increase on fear of LNG shortage

LONDON - Benchmark European wholesale gas prices increased on Wednesday morning after reports that Iran had laid mines along the 'Strait of Hormuz' raised concerns about liquefied gas supply.

The conflict in the Middle East would also last a lot longer than expected.

ICE data shows that the Dutch front-month contract, which is the benchmark price in Europe, increased 5.7%, to 50.09 Euro per megawatt hour at 0918 GMT.

ICE data shows that the British April contract increased 6.03%, to 127.90 cents per therm.

Ulrich Weber, LSEG analyst, said: "The news that Iranians are?starting to mine Strait of Hormuz" would create further obstacles to the resumption of ship traffic. U.S. Central Command released a statement saying that the U.S. Military "eliminated 16 Iranian mine-laying ships near the strait" on Tuesday. Donald Trump has warned that all mines erected in the Strait by Iran must be immediately removed. Goldman Sachs analysts say that uncertainty about'supply shock duration' can have a significant impact on gas prices.

"Specifically, in a scenario that the market fears this large supply shock could linger for several months, it creates an urgency to counteract the tightening of global gas balances. It is particularly true given that gas markets typically appear to have a comfortable level of?inventory ahead of winter," the researchers said in a note.

The tenders for LNG delivery in March are still unawarded. This indicates a?shortage of fuel immediately available.

The hotter weather that is predicted for Southeast Asia in the coming months will increase power demand. Daniel Hynes is a senior commodity strategist with ANZ. He said that the region would also have to compete 'with European buyers who are looking to replenish storage for their heating'season. LSEG data shows that temperatures in Northwest Europe are expected to begin?falling. The day ahead is expected to be?0.8 degrees Celsius cooler, and Sunday's minimum temperature will likely reach a minimum.

The benchmark contract on the European carbon markets was up 0.78 euros at 73.69 euro per metric ton. (Reporting and editing by Harikrishnan Nair; Marwa Rashad)

(source: Reuters)