Freedom: the situation around Iran could determine the direction of gas prices

Developments in the Middle East could become one of the key factors for gas prices in the week of November 2–6, according to Freedom Broker analysts Sergey Pigarev and Akmaral Burkutova. A resumption of military actions against Iran after the U.S. congressional midterm elections could support quotes. If Washington continues economic pressure in order to reach agreements, the analysts allow for a high probability of a price decline.

These are the scenarios presented in Freedom’s industry review dated November 2. The market’s direction will depend on the parties’ actual decisions, as well as inventories, demand, and supply availability.

European inventories remain below the usual level

According to the review, as of November 1 the European Union’s gas storage facilities were 74.6% full versus a five-year average of 89.8%. The end of the injection season with relatively low inventories and competition with Asia for liquefied natural gas supported European prices.

Over the previous week, quotes at the European gas hub TTF rose 7.5% to $34.1 per million British thermal units – the standard unit of energy measurement. According to Freedom’s estimate, this is the highest level since December 2022.

The rise in U.S. quotes is partly related to the contract roll

In the U.S., gas rose 9.8% over the week to around $2.9 per million British thermal units. The analysts note that this dynamic was influenced by the switch from the expired November futures contract to the December one. Therefore, the entire gain cannot be explained by changes in the supply-and-demand balance.

At the same time, U.S. inventory statistics acted as a constraint on prices. For the week ended October 23, inventories increased by 80 billion cubic feet versus 75 billion expected, according to the Freedom review.

According to ⁠data from the U.S. Energy Information Administration, total volume reached 3.724 trillion cubic feet. That is 3.8% below last year’s level, but 1% above the five-year average.  

Geopolitics adds to seasonal factors

Earlier, Freedom ⁠warned about a reduction in the growth potential of gas producers’ shares. In the October piece, the analysts highlighted low demand from power plants and expectations of warm weather, which could restrain prices ahead of the heating season.  

In the new review, experts draw attention to an additional source of uncertainty – U.S. decisions regarding Iran. Escalation could intensify supply concerns and support prices, whereas maintaining economic pressure without resuming military actions could lead to a correction.

This is not an individual investment recommendation.