Natural gas prices in Europe need to jump by December for European storage to fill up with enough inventory for the coming winter if the Strait of Hormuz crisis persists and keeps spot LNG prices in Asia elevated, according to Goldman Sachs.
Since the Middle East crisis began, Europe has started losing the competition with Asia for spot LNG supply amid spiking prices in the absence of most Qatari LNG term volumes.
The Iran war and the intensified competition from Asia came just as Europe is trying to build in the spring and summer natural gas inventories for the next winter.
Current storage levels are about 62% full, data from Gas Infrastructure Europe shows. That’s the lowest level for this time of year in nearly two decades and well below the five-year average.
Current inventory levels are at the lowest in 17 years, and supply available for purchase is tighter than it was back in 2022. Yet Europe needs to start buying gas now—or risk shortages.
The LNG squeeze and the uncertainty about supply prospects have had a direct and rather painful effect on prices. Europeans are competing with Asian gas buyers for a limited volume of LNG, and are currently losing this race.
The current benchmark natural gas prices in Europe at the Dutch Title Transfer Facility (TTF) “will not be enough for Europe to manage storage through winter,” Goldman Sachs analysts wrote in a note this weekend, carried by Bloomberg.
“In a scenario where Middle East energy exports normalize only gradually through 2027, we estimate that December 2026 TTF would likely need to move above €100/MWh,” they said.
This is 110% above Goldman Sachs’ base case of 50 euros per MWh, the analysts said.
As of Monday morning, Europe’s benchmark natural gas prices, the Dutch TTF Natural Gas Futures, were up by 1.5% at $78 (66.85 euros) per MWh, much lower than the $116 (100 euros) per MWh price Goldman estimates would incentivize accelerated stockbuilding in the coming months.
By Charles Kennedy for Oilprice.com
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