European natural gas prices fall to a two-week low

European natural gas prices fell by 3.5% on Friday to €87.40 per megawatt-hour, hitting a two-week low with the weekly decline widening to around 16%, as the market pins high hopes on the resolution of the Middle East conflict through diplomatic means. Market sentiment improved after the Emir of Qatar discussed efforts to ease tensions with US President Trump, and optimism was further boosted by the progress made by the Democratic Party in the US midterm elections. However, prices remain much higher than pre-war levels, as exports of Middle Eastern liquefied natural gas—which account for about one-fifth of global supply—have been disrupted, putting Europe under pressure from tight market supply ahead of the winter. EU gas inventories have dropped to 74%, far below the five-year seasonal average of 90%, and German inventories are below 61%. Falling temperatures and weaker wind and solar power production have increased inventory withdrawals, while Norwegian pipeline supply remains limited due to outages. With Asian buyers ramping up spot purchases, competition for liquefied natural gas is also expected to intensify.