European Petrol Prices Rise on Fears the US-Iran War May Produce Winter Shortages

Due to concerns about supply shortages this winter brought on by the intensifying conflict in the Middle East, European petrol prices have reached a four-month high.

After the US increased its aerial offensive and Iran replied with strikes on Bahrain and Kuwait, the Dutch natural gas benchmark momentarily surpassed €60 per megawatt hour (MWh) on Monday, close to the peaks observed at the beginning of the US-Iran conflict.

According to analysts at Independent Commodity Intelligence Services (ICIS), the crisis has postponed the anticipated recovery of Qatari liquefied natural gas (LNG) exports during the crucial summer storage season, putting pressure on Europe's gas supply this winter.

Growing Prices Threaten EU Gas Storage Targets

According to Andreas Schroeder, head of energy analytics at ICIS, “a cold winter start would substantially increase the cost of meeting the EU's 80% storage target. While security of supply remains achievable, the cost of achieving it rises sharply.”

Although its modelling indicated that European gas storage might still meet targets by late November, the market intelligence business cautioned that “potentially costly state intervention to safeguard security of supply” may occur if the price of gas remained at roughly €60 per MWh.

Compared to 64% at this time last year, European gas storage is currently less than 54% filled.

According to ICIS, since the conflict started on February 28, only 26 LNG cargoes have been able to cross east out of the Gulf, compared to the typical 90 to 100 each month. European nations may have to pay €54 per MWh this autumn to replenish supplies, and up to €60 per MWh if a colder start to winter materialises.

Hormuz Tensions Drive Up Global Gas & Oil Prices

Gas supplies have already been impacted by the disruption to Qatari LNG exports; ICIS reduced its estimate for the world's LNG supply this year from 441 million tonnes to 431 million.

Besides, approximately 20% of the world's oil and gas travelled through the Strait of Hormuz before the start of the Iranian conflict, and the most recent escalation, which coincides with officials claiming that negotiations are still ongoing, once again puts shipping in jeopardy.

Likewise, the new round of fighting has had an impact on the oil markets. On Sunday, Brent crude briefly surpassed $90 a barrel, its highest level in a month, before declining when Iran stated that diplomatic talks with the US through mediators were still going on in spite of the strikes.

Later on Monday, the price of petrol dropped to almost €57 per MWh.

Furthermore, the head of energy at the Energy and Climate Intelligence Unit, Jess Ralston, underlined that the UK is closely linked to international markets. Gas prices have approached levels seen at the onset of the US-Iran war, highlighting the limited influence of UK actions on domestic fuel costs. This connection exposes the country to price volatility, exacerbated by conflicts occurring far from its shores, particularly over the last few years.

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