Europe's benchmark natural gas prices held above the 80-euro threshold early on Wednesday, hovering near their 2022 highs, as low storage volumes deepened concerns over winter supplies amid the continuing disruption and widening conflict in the Middle East.

The front-month contract at the Dutch Title Transfer Facility (TTF), the benchmark for Europe's gas trading, rose 0.3% to $92.95 (80.545 euros) per megawatt-hour (MWh) as of 9:15 a.m. in Amsterdam on Wednesday. Prices have remained above the 80-euro per MWh level throughout the week after soaring 6% on Monday to their highest point since the 2022-2023 crisis, when disrupted Russian pipeline supplies upended the continent's energy market.

The rally extends a streak of five weekly gains, driven by materially heightened risks to oil and gas supplies in the Middle East following Saudi Arabia's weekend shutdown of its key East-West oil pipeline, which allows the kingdom to bypass the Strait of Hormuz, the chokepoint at the mouth of the Persian Gulf through which much of the region's oil and LNG exports must pass.

Europe is heading into winter with one of the lowest levels of gas in storage in the past two decades — a shortfall that leaves less of a cushion to draw on when heating demand peaks. The war in the Middle East has crippled LNG supply from Qatar, sent gas and LNG prices in Europe and Asia skyrocketing, and intensified competition for readily available global LNG cargoes that do not need to cross geopolitically charged chokepoints.

Spot LNG prices in Northeast Asia have jumped by $2.70 from last week to $28.40 per million British thermal units (MMBtu) this week, according to Energy Intelligence assessments for LNG deliveries one to two months ahead.

"Escalation in the Middle East is deflating hopes of any imminent pick-up in LNG flows from the Persian Gulf. This leaves the global LNG market tight and vulnerable as we edge closer towards the northern hemisphere heating season," ING commodities strategists Warren Patterson and Ewa Manthey wrote in a note on Tuesday.

"Moves in the JKM-TTF spread suggest that Europe should be pulling in spot cargoes. Despite this, the region will struggle to hit its lower storage target of 75% ahead of winter," the strategists added.

The JKM — the Japan-Korea Marker, the benchmark spot price for LNG delivered to Northeast Asia — matters to European buyers because spot cargoes typically sail to whichever market pays more. How that differential evolves, alongside any in Qatari LNG flows, will be among the key variables in whether the bloc can close the gap to its 75% storage target before the heating season arrives.

By Michael Kern for Oilprice.com

Source: TTF Gas Hits $92.95 as Gulf Tensions Weigh on Energy Markets