European gas prices fall after report of US-Iran deal

The benchmark wholesale gas price for the European market has fallen sharply since this morning, with the drop exceeding five percent. Traders are reacting to reports of an agreement between the United States and Iran to end the fighting. The agreement also includes reopening the Strait of Hormuz, a key shipping route for exports of oil and liquefied natural gas (LNG) from countries around the Persian Gulf.

Shortly before 9:30 CEST, a futures contract for natural gas for delivery in July was trading at around 44 euros (1060 Kč) per megawatt-hour (MWh) at the virtual Title Transfer Facility (TTF) trading hub in the Netherlands. Compared with Friday, its price was down 5.9 percent. TTF is the main natural gas market in the European Union.

The price of gas for delivery to Britain is also falling by a similar amount. At the same time, the front-month contract was showing a comparable decline and was trading close to 1.06 pounds per British thermal unit. Converted to megawatt-hours, this is comparable to the price at TTF.

Both contracts are trading at their lowest levels since the beginning of May. This is despite continued uncertainty over how quickly production in the Persian Gulf region can be restored. Around 20 percent of the world's LNG supplies normally pass through the Strait of Hormuz.

US President Donald Trump said the strait would reopen on Friday. European Commission (EC) President Ursula von der Leyen, however, called for it to be reopened immediately. According to ship-tracking data, an LNG tanker chartered by India's Petronet sailed east through the Strait of Hormuz this morning.

Analysts say the key question now is how quickly production in the region can be restored.