Goldman Sachs says risks to its year-end TTF forecast of 70 euros per megawatt hour are skewed to the upside. Low European inventories and falling Middle East LNG exports leave the region exposed heading into winter.
Goldman Sachs sees the risks to its year-end European gas forecast tilted to the upside, as low storage and falling Middle East LNG exports leave Europe exposed heading into winter.
The bank's base case is for the Dutch TTF benchmark to stand at 70 euros per megawatt hour at the end of the year. Goldman notes that low inventories and a sequential drop in Middle East LNG exports have supported prices in the mid-80s. The gap implies the bank still expects some easing in its base case, but sees the balance of risks leaning toward higher prices.
A 105 euro peak in a low-supply winter
In a scenario that combines low supply with average winter weather, the bank estimates TTF would have to rally to a peak of around 105 euros/MWh. At that level, enough LNG demand elsewhere would be priced out to free up cargoes for Europe.
Europe relies on LNG imports, so it competes with buyers worldwide, particularly in Asia, for the same cargoes of natural gas. In practice, Europe would need to outbid those buyers for a limited pool of seaborne gas.
Weather widens the range
Weather adds another layer of uncertainty. Goldman said uncertainty over winter conditions widens the range of possible outcomes further. A cold winter would accelerate storage withdrawals and intensify competition for cargoes, while a mild one would ease pressure on both inventories and prices.
The drop in Middle East LNG exports links the European gas market to the conflict in the region, which has already disrupted crude flows and shipping. With storage starting from a low base, Europe has less room to absorb a supply shock or a cold snap than in a typical year. Goldman's assessment suggests gas traders will be watching Gulf export volumes and weather forecasts closely, and the path of TTF this winter is likely to depend on how both develop.
Source: Investinglive
Trading involves risk.
Risk Disclaimer
