J.P. Morgan: Commodities Weekly: European gas prices top one hundred, Russian refining recovery may ease diesel tightness

Why has European natural gas again topped 100 euros?

European natural gas prices have risen above 100 euros per megawatt-hour for the first time since 2022, which JPMorgan attributes to supply and demand fundamentals and the possibility of renewed escalation in the Middle East.
From 19 October to the 25th, natural gas demand in northwestern Europe and the UK averaged 541 million cubic meters per day, up 20% from the previous week and 5% year over year; all of the week-on-week increase came from heating demand, while wind generation rose 70% week over week, leaving demand for gas-fired power generation broadly flat.
However, average daily demand in October through that week was 450 million cubic meters, approximately 15% lower year over year and 16 million cubic meters below the bank's latest forecast, mainly because of warmer weather in the first half of the month. JPMorgan expects full-month demand to be closer to its forecast.

There have been no further confirmed attacks on Russian refining facilities since the attack on the Ryazan refinery on 15 October. Russian refinery throughput recovered by 350 thousand barrels per day week over week last week to 4 million barrels per day.
JPMorgan estimates that, if attacks remain paused, throughput could recover to 4.5 million barrels per day or more in November; at a diesel yield of 37%, diesel output would be approximately 1.7 million barrels per day. After domestic demand of approximately 1.2 million barrels per day, approximately 500 thousand barrels per day would be available for export, potentially easing global diesel tightness.
The recovery reflects improved operating conditions rather than a permanent repair of refining capacity; renewed attacks could quickly reverse it. Increased refining could also support a recovery in Russian crude production, but port capacity and damage from attacks will limit the increase in crude exports.

After the effective closure of the Strait of Hormuz, regional exporters maintained shipments through bypass pipelines, alternative routes, sailing with vessel signals switched off, and ship-to-ship transfers. Crude flows have recovered to near prewar levels, while liquefied natural gas (LNG) lags crude.
LNG transportation requires specialized vessels that are in tighter supply, and insurance is also more expensive, so Qatar faces greater physical, logistical and insurance constraints. Since September, Qatar appears to have made greater use of older vessels, switched-off signals and ship-to-ship transfers; tracking vessel automatic identification systems alone will underestimate actual transit activity.

Agricultural risk premiums have fallen markedly in recent weeks: the Bloomberg Commodity Agriculture Index's year-to-date gain narrowed from a peak of approximately 24% in early September to approximately 8.5%, while a strong El Niño is approaching a peak of historic intensity.
JPMorgan believes the 2026/27 agricultural fundamentals outlook has changed little over the past month, making it difficult to explain such a large sector sell-off; the bank believes consumers can use the price decline to increase their forward purchasing coverage.
The next areas of focus include the competitiveness of US export sales after the price decline and South American weather, where El Niño-related rainfall anomalies continue to intensify. The US Department of Agriculture will release its supply and demand forecast report on 10 November.

The value of commodity open interest tracked by JPMorgan rose by 19.8 billion dollars week over week to 2.07 trillion dollars last week, increasing for a third consecutive week.
Energy was the main driver: its open-interest value rose by 39 billion dollars week over week to a record, including net inflows of 16 billion dollars on a contract basis, while higher energy prices also boosted the valuation.
Over the same period, outflows from base metals markets, together with declines in gold and silver prices, reduced the value of metals open interest by 13.4 billion dollars; agricultural open-interest value fell by 7.6 billion dollars because of lower prices and outflows from grain and oilseed markets.