Dutch and British gas contracts firmed for the first time in over a week as renewed attacks in Lebanon and the cancellation of talks intended to pave the way for lasting truce between the US and Iran dimmed market sentiment.
The benchmark Dutch front-month contract at the TTF hub was up €1.20 at €41.74 per megawatt hour (MWh) by 08:43 GMT, data from the Intercontinental Exchange (ICE) showed.
The British front-month contract was up 2.99p at 99.68p per therm.
"We expect rising prices Friday where the markets respond bullishly to the renewed Israel-Hezbollah fightings," analysts at Denmark's Mind Energy said in a note.
Israel has stepped up attacks on Lebanon, while negotiations to firm up a preliminary agreement to end hostilities between the US and Iran planned for Friday have been cancelled, host Switzerland said.
Prices had fallen almost 20 per cent over the past week on hopes that the signing of the interim US-Iran agreement to halt the war and open the Strait of Hormuz will see a timely resumption of liquefied natural gas (LNG) shipments from the Persian Gulf.
"It seems the market is waiting for hard evidence that tanker traffic through the Strait of Hormuz is actually normalising before pushing prices even lower," analysts at Engie EnergyScan said in a note.
High temperatures across Europe are likely to support cooling demand and may disrupt nuclear output, leading to more gas-fired power generation and limiting storage injections, analysts at Northern Gas and Power said.
"With European storage already 14 per cent below the five-year average and June net injections running five per cent below average, refill rates remain a key risk ahead of winter," they added.
EU gas storage sites were last 45.56 per cent full, compared with 54.38 per cent at the same time last year, Gas Infrastructure Europe data showed.
(Reporting by Nora Buli; Editing by Susanna Twidale)
