EUROPE GAS-Prices rise as geopolitical tensions fuel supply disruption concerns
LONDON, June 23 (Reuters) - Dutch and British wholesale gas prices rose on Monday morning as markets braced for Iran's response to the U.S. attack on its nuclear sites and raised fears of supply disruptions and higher insurance costs if Tehran moves to close the Strait of Hormuz.
The benchmark Dutch front-month contract at the TTF hub TRNLTTFMc1 added 0.95 euro to 41.60 euros per megawatt hour (MWh), or $14.01/mmBtu by 0803 GMT, LSEG data showed.
On Thursday, the contract briefly rose to 41.85 euros/MWh intraday, its highest level since April 2.
The British front-month contract TRGBNBPMc1 was up by 2.39 pence to 98.55 p/therm. It also hit its highest since April 2 at 98.66 p/therm on Thursday.
Iran's parliament reportedly approved the closure of the Strait of Hormuz, through which around 20% of global oil and gas demand flows, but the Supreme National Security Council must make the final decision.
Daniel Hyenas, senior commodity strategist at AN said that over 20% of the world's LNG trade would be at risk, namely exports from Qatar, adding that this comes as European buyers are racing to replenish depleted stockpile ahead of the next heating season.
"While Iran will threaten to close the Strait fully, its ability to do so may be challenged by U.S. military presence in the region. However, this undoubtedly increases the risk of any vessel passing through the Strait, which will result in players having to price in a risk to supply disruption, and an increase in insurance costs," said Lug Ming Pang, senior gas and LNG analyst at Rystad Energy.
The news sent oil prices to their highest since January, and sent spot Asian LNG prices to a four-month high. O/R LNG/
Analysts at Engine's Energy said that in addition to losing its oil revenues, the blockage would be counterproductive to Iran's relationship with its main oil customer, China, and could give the U.S. - who wants lower oil prices and lower inflation - even more reasons to go to war.
On market fundamentals, demand across Northwest Europe is forecast to decline further due to warmer temperatures, while a significant increase in Norwegian exports will further support storage injections, said LSEG analyst Ole Skrynyk.
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