European gas benchmark TTF has surged to its highest level since early April, with prices settling 5.7% higher in a single day, following renewed tensions in the Persian Gulf [1]. According to ING analysts Warren Patterson and Ewa Manthey, both the European gas market and the Asian LNG market are underestimating the potential scale of supply disruptions stemming from the region [1].
The report notes that while EU LNG imports in April declined from record highs seen in March, LNG send-outs remain seasonally elevated, which has contributed to EU gas storage levels trending higher. Currently, EU gas storage is approaching 34% full, compared to a five-year average of almost 46% full for this time of year [1].
ING analysts emphasize that there is limited capacity for the global gas market to compensate for any LNG supply losses from the Persian Gulf. As a result, they argue that further demand destruction, driven by higher prices, will likely be necessary to rebalance the market [1].
The escalation in the Persian Gulf has already triggered a notable repricing of risk in European gas markets, but ING maintains that the market is still not fully reflecting the potential supply impact [1].
CONCLUSION
European gas prices have spiked in response to Persian Gulf tensions, but ING analysts believe the market is still underestimating the risk of supply disruptions. Higher prices and potential demand destruction may be required to restore balance if the situation persists.