The price of gas in Europe is rising as the uncertainty surrounding the Hormuz Strait fuels volatility
Dutch and British Gas Contracts on Monday Morning rebounded from heavy losses experienced late on Friday amid mixed messages over the?U.S. - Iran?peace?negotiations and whether or not the Strait of Hormuz is open.
Data from the Intercontinental Exchange showed that the benchmark Dutch front-month contract was up 2,21 euros to 40,98 euros per megawatt (MWh) at 0655 GMT.
Volatility is very high. The contract reached an intraday peak of 43.00 euro/MWh after plummeting to as low as 38.77 euro/MWh last Friday, its lowest level since March 2. This was due to news of Iran reopening the Strait of Hormuz.
After the hopes of an Iran-U.S. deal, European natural gas prices recovered most Friday's losses. Saxo Bank in Denmark said that the peace deal faded during a weekend of renewed tensions.
The British front-month contracts increased by 6.11?pence to 103.22 pence a therm.
The U.S. has maintained its blockade on Iranian ports, and on Saturday the?Iranians reimposed their own blockade in?the Strait which is responsible for about a fifth global supply of liquefied gas.
On Monday, concerns grew that the ceasefire agreement between the United States of America and Iran may not last after the U.S. announced that it had captured an Iranian cargo vessel that attempted to break its blockade. Iran also promised to retaliate.
Analysts at SEB stated in a note that there are major differences between what is described as ongoing peace talks and what was actually agreed. There is also a high level of uncertainty regarding what will happen after the current ceasefire expires this Wednesday.
The confusion was exacerbated by the fact that the Vedomosti Russian newspaper reported the Iranian ambassador in Moscow saying,?Iran will ensure the safe passage of ships through the Strait' under a "new legal regime".
Arne Lohmann-Rasmussen is the chief analyst of Global Risk Management. He said that if the war continues, and the Hormuz Strait remains closed, the gas prices are expected to increase further, as 20% global LNG will remain 'cut off' from the market.
He added that Europe faces the'major task' of replenishing its storages in preparation for next winter.
Gas Infrastructure Europe's data shows that EU gas storage sites were 30.2% filled at the end of last year. This compares to 36.5% around the same time last.
The benchmark contract on the European carbon markets was down by 0.93 euros at 76.53 euro per metric ton. (Reporting and editing by Joe Bavier; Nora Buli)
(source: Reuters)
