At 04:33 GMT, April Natural Gas futures are trading $2.917, up $0.058 or +2.03%.
Strait of Hormuz Shutdown Could Send U.S. LNG Demand Soaring
According to my research, the narrow Strait of Hormuz carries roughly 20 percent of the global LNG trade. If the Strait is blocked during the war, U.S. LNG demand could soar, taking natural gas prices with it. The blocking of the Strait will mean natural gas from the region will have a hard time getting to its European destination, and that means Europe will have to turn to the United States for supply.
Energy analytics firm ICIS just ran a model that suggests a three-month disruption would spike European benchmark gas prices higher, and this could lead to supply problems next winter. Europe relies on Qatari LNG volumes that move product through the Gulf.
The ICIS report went on to say that a three-month disruption of Qatari LNG would mean about a 14% hit to European supply. They also added that a disruption of that magnitude would likely push European gas supply into shortage territory.
Traders Watching for Supply Disruptions at the Start of the War
Natural gas traders will be watching the events in the Middle East closely to see if supply is already being interrupted at the start of the war. This could underpin prices and slowly drive up the market the longer the Strait is shutdown.
Traders will also be monitoring demand and production in the U.S. because the market still has a 0.3% deficit against the 5-year seasonal average to make up. Europe is also showing signs of a deficit, as of February 24, gas storage in Europe was 30% full versus the 5-year seasonal average of 47% full for this time of year.
