Goldman Sachs Raises Concerns Over European Gas Prices Amid Low Inventories

Goldman Sachs has indicated that the risks to its year-end forecast for European natural gas prices are skewed to the upside, primarily due to low storage levels and decreasing liquefied natural gas (LNG) exports from the Middle East. The bank's base case anticipates that the Dutch Title Transfer Facility (TTF) benchmark will reach 70 euros per megawatt hour by the end of the year, although current prices are already in the mid-80s, suggesting a potential for further increases.

The analysis highlights that in a scenario of low supply combined with average winter weather, TTF prices may need to peak at approximately 105 euros per megawatt hour. This price point would be necessary to reduce LNG demand outside of Europe, allowing the region to secure sufficient supplies. The situation is exacerbated by the need for Europe to outbid other global buyers, particularly in Asia, for a limited number of LNG cargoes.

Goldman Sachs also noted that the ongoing conflict in the Gulf region has disrupted crude oil flows and shipping, directly impacting the European gas market. With storage levels starting from a low base, Europe faces a tighter supply situation than usual, making it more vulnerable to both supply shocks and adverse weather conditions this winter. The bank emphasizes that both Gulf export volumes and winter weather forecasts will be critical factors for gas traders to monitor closely.

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Source: KLEA News