ING’s Warren Patterson and Ewa Manthey report that European gas benchmark TTF has climbed to its highest level since early April following renewed tensions in the Persian Gulf. They argue that both the European gas market and Asian LNG market are underestimating the scale of supply disruption and contend that further demand destruction, driven by higher prices, will likely be needed to rebalance.

European gas and LNG risk repricing

"European gas prices also moved higher yesterday following the escalation in the Persian Gulf. TTF settled 5.7% higher on the day and at its highest level since early April."

"While EU LNG imports in April fell from record levels in March, LNG send-outs remain seasonally high, which has kept EU gas storage trending higher, approaching 34% full vs a 5-year average of almost 46% full."

"We continue to believe the European gas market and Asian LNG market are underpricing the scale of the supply impact we are seeing from the Persian Gulf."

"There is little the global gas market can do to offset Persian Gulf LNG supply losses other than to see further demand destruction, and to do that, higher prices are needed."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)