European energy stocks open lower as traders reassess Hormuz reopening prospects
U.S. natural gas futures led the energy complex higher on Thursday after TC Energy declared force majeure on a pipeline in West Virginia following a leak. Nymex natural gas rose 9.1% to $3.297 per million British thermal units, the largest single-day gain since January and the highest close in three months, according to The Wall Street Journal’s Market Talks roundup. The outage affects an estimated 1.8 billion cubic feet per day of supply from Appalachia. Prices were also supported by a sixth straight below-average storage build that reduced the U.S. inventory surplus over the five-year average to 95 billion cubic feet from 118 billion cubic feet.
Oil benchmarks moved in the opposite direction. In European trading, front-month Brent fell 1.1% to $105.45 a barrel and West Texas Intermediate dropped 1.9% to $92.85, as investors assessed the likelihood that U.S.-Iran diplomatic efforts could reopen the Strait of Hormuz. Major European energy stocks opened lower: BP fell 2%, Shell dropped 0.4%, France’s TotalEnergies lost 0.8%, Spain’s Repsol fell 0.6%, Italy’s Eni slipped 0.2%, and Norway’s Equinor declined 1.3%.
The pattern extended from the Asian session, where front-month WTI had already declined 0.8% to $93.87 a barrel and Brent slipped 0.6% to $105.95. Traders parsed reports that Iran was making a new proposal to reopen the strait and potentially restart talks with Washington, OCBC strategists told the Journal, though market participants remained cautious given the history of failed negotiations between the two countries.
Linh Tran at XS.com attributed the WTI decline to a reassessment of Middle East supply-disruption risk against the prospect of a U.S.-Iran agreement. The move appeared driven by reports that Washington and Tehran were considering a roadmap to end the conflict, Tran said, though no concrete agreement had been announced. Tran added that WTI faced additional pressure from higher U.S. crude inventories and the possibility of diesel export curbs, while Brent remained supported by concerns over international supply disruptions — widening the spread between the two benchmarks. At 0413 GMT, front-month WTI was last at $93.08 a barrel and Brent at $105.65 a barrel, according to Tran. Tran said WTI faced continued consolidation and would likely underperform Brent.
The diplomatic backdrop was complicated by a spate of Houthi attacks on Saudi targets that had raised concerns of escalation in the Middle East. Oil futures had settled higher the previous session, with WTI gaining 2.7% to $94.61 a barrel and Brent rising 3.4% to $106.60, as the market remained pessimistic about the U.S. and Iran reaching an agreement anytime soon. “You’re seeing a lot of turmoil, a lot of uncertainty in the short term,” Phil Flynn of the Price Futures Group told the Journal. “Concerns about rates going up, concerns about the dollar, a lot of nervousness.” Fears about a possible U.S. diesel export ban were adding further uncertainty, Flynn said.
Separately, Citi analyst Tianhong Bi wrote that Var Energi’s deal to buy BlueNord strengthened the equity story well beyond the announced synergies. Var Energi announced in July that it would acquire Oslo-listed peer BlueNord in a cash-and-stock deal valued at approximately $1.3 billion. Citi said Var shares had undergone a significant rerating over the previous year but still saw further upside as BlueNord extended cash-flow potential and strengthened confidence in a new 450,000 barrels of oil equivalent per day production ambition. “The combination broadens the resource base, reduces reliance on the higher-decline Norwegian portfolio and creates a 2nd infrastructure-led development engine in Denmark,” Bi wrote. Citi raised its target price to 57 Norwegian kroner from 48 kroner and kept a buy rating; shares closed at 53.28 kroner.