January 3, 2025 (Globalinvestorideas.com Newswire) Globalinvestorideas.com, a go-to platform for big investing ideas releases market commentary from Samer Hasn, Senior Market Analyst at XS.com
Natural gas prices continue to correct from recent highs. US Henry Hub futures have fallen to $3.558 per million British thermal units (mmBtu), down more than 15% from their highest levels since January last year, which were recorded in December at $4.201.
While UK and European natural gas futures (TTF) remain near their highest levels since November 2023.
The rally was driven by favorable cold weather forecasts and the expiration of the Russian natural gas supply to Europe via Ukraine.
However, historical developments in the Middle East, represented by the fall of the Bashar al-Assad regime in Syria and the emergence of a new administration with close ties to Qatar and Turkey, are also likely to impact natural gas market dynamics, particularly in Europe. While the Assad regime had rejected the project to pump Qatari gas through pipelines to Europe via Syria, today, after its fall, this pipeline may actually see the light.
This project would diversify Qatari export routes and could secure long-term contracts with Europe, even with the capabilities of the liquefied natural gas (LNG) exports, and strengthen Turkey’s position as a vital player in the energy market, according to Anadolu Agency.
This project would make the European natural gas market more competitive, which could increase downward pressure on prices, which are still very low compared to the historical peaks of 2022. The European market is suffering from an oversupply due to mild winter seasons and weak economic activity, in addition to the increasing competition brought about by the development of natural gas liquefaction and transportation technology.
On the other hand, the cross-border project may continue to face many obstacles. On the European side, the lack of a near horizon for restoring economic strength, along with the increasing shift towards renewable energy sources – which in turn could be driven by the continued low interest rates in the eurozone – would keep demand prospects weak amidst the prevailing competition.
Regulatory hurdles could also hamper gas supplies to Europe, given Qatar’s reluctance to pay any fines that could be imposed as a result of European Commission’s due diligence law and will stop gas shipment, Qatari Energy Minister Saad al-Kaabi told the Financial Times in December.
From the Syrian side, this strategic project requires a solid peace in the country. Russia and Iran may not want that. In the context of the Qatari gas pipeline, these three countries are competing in this market, and this project will further reduce any possibility of gas supplies to Europe from Russia and Iran in the future, even if the current deep conflicts are resolved. Therefore, political developments in Syria may play a pivotal role in the energy market going forward.
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