Goldman Sachs has cautioned that European natural gas prices may need to climb above €100 per megawatt-hour ($117) by December to enable the continent to rebuild sufficient inventories ahead of the upcoming winter. In a recent report, analysts Samantha Dart and Laura Seal noted that despite a recent rebound in the Dutch front-month futures contract—the benchmark for European gas—the current price levels remain inadequate to attract enough liquefied natural gas (LNG) from Asia if Middle Eastern supply disruptions persist into next year.
Last week, the Dutch futures contract surged to a five-month high, exceeding €65 per megawatt-hour. With shipping through the Strait of Hormuz dwindling to a trickle amid the US-Iran conflict, European buyers are grappling with significant procurement challenges as they compete fiercely with Asian counterparts for limited LNG cargoes. Natural gas, widely used for power generation across the continent, typically sees its stockpile replenishment during the summer months, but this year's refill pace has lagged behind historical norms.
According to the report dated Sunday, at current consumption and refill rates, natural gas storage facilities in Northwestern Europe are projected to end this month at 51% full capacity—3.4 percentage points below Goldman Sachs' baseline forecast. This shortfall comes at a critical juncture as Europe faces mounting pressure to bolster gas reserves before winter demand escalates, while Middle East hostilities severely constrain global energy flows.
With no immediate resolution in sight, US President Donald Trump has announced plans to impose what he calls an "economic D-Day" strike against Iran. The analysts wrote that at prevailing price levels, the market "is not sufficient to support Europe in managing gas inventories and getting through the entire winter." They added: "Under a scenario where Middle East energy exports do not gradually normalize until 2027, we anticipate that TTF gas prices in December 2026 may need to rise to over €100 per megawatt-hour." This projection represents a 110% premium above Goldman's baseline forecast of €50 per megawatt-hour.
However, a glimmer of hope for Europe could emerge from weather forecasts. While Goldman's latest outlook assumes average winter temperatures, a report from Maxar Technologies this month suggested that if a "super" El Niño phenomenon drives temperatures at least 2 degrees Celsius (3.6 degrees Fahrenheit) above historical averages, gas demand could decline, potentially offsetting the impact of low inventories.
Where to Begin: For more comprehensive Hong Kong stock market coverage and insights, download the Zhitong Finance app. For additional Hong Kong stock and offshore investment information, visit www.zhitongcaijing.com. To join the Zhitong Hong Kong stock investment community, contact customer service via WeChat at ztcjkf.