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The European bellwether front-month gas contract on the Dutch TTF hub initially dropped to EUR 42.50/MWh on Ice Endex this morning (8th April), its lowest since 2nd March, before recovering slightly to EUR 43.46/MWh, at the time of writing.
This follows the two-week ceasefire agreement between the US, Israel and Iran after nearly six weeks of war, with Iran agreeing to reopen the Strait of Hormuz, through which around a fifth of the world’s LNG and oil passed prior to the war, if the halt to hostilities is honoured.
“The first thing to see is whether ships can safely pass through the Strait of Hormuz,” said Henning Gloystein, Managing Director of Energy and Resources at Eurasia Group.
“If they pass freely, it’s possible that Qatar starts repairs to its Ras Laffan facilities, but I don’t think they can ramp up production within the two-week ceasefire window,” he said.
The waterway has remained effectively closed since hostilities began on 28 February, with an Iranian strike on Qatar’s Ras Laffan LNG hub on 18 March also knocking out an estimated 17% of export capacity.
Turning point?
Speaking to Montel News, Yahdian Falah, Senior Portfolio Manager at trading firm Trianel, said: “This is a strong relief and could be the turning point for the global gas market to rebalance.”
“The ceasefire removes risk of further damage to infrastructure, while reopening the Strait of Hormuz will bring volumes back into the market,” he added. He anticipated an ‘immediate risk-off movement’ for gas prices.
Yet ‘further elimination of risk premium’ would be subject to evidence of increased traffic through the strait, he added.
In a note, ANZ bank analysts added: “Even if shipping routes reopen, missing Qatari output cannot be replaced quickly, leaving the market to clear through higher prices, inventory drawdowns and demand rationing.”
