Goldman Sachs expects natural gas prices in Europe to drop by around 30% in the coming months as nations have a temporary advantage over supply problems. The Dutch Title Transfer Facility (TTF) it is the main European benchmark for natural gas prices and trades at around 120 euros per megawatt hour. According to research released last week, Goldman Sachs expects prices to drop to 85 euros per megawatt hour in the first quarter of 2023a significant change from the record highs seen in August, almost triple the current prices.
The invasion of Ukraine by Russia and the resulting pressure on the European energy mix had pushed prices to historic figures – over 340 euros per megawatt hour. The recent cooling in gas prices is due to several factors: lo storage of gas in Europe substantially full for this winter season; the temperatures this autumn are milder than expected, thus delaying the start of a period of heavy use; a excess supply of liquefied natural gas (LNG).
Ships full of LNG ready to flood Europe with gas
Recent reports indicate around 60 ships waiting to unload their LNG cargo in Europe. Some of these cargoes were purchased during the summer and are only now arriving as the stockpiles fill up. In fact, the latest figures compiled by the Gas Infrastructure Europe industrial group show that storage levels in Europe are at 94%. Despite optimism about reducing gas prices in the short term, which could partially alleviate the cost of living crisis, European leaders are under a lot of pressure to secure supplies in the medium term. “Our commodities team expects a further decline to EUR 85 in the first quarter, before a sharp recovery next summer, thanks to the replenishment of storage levels,” Goldman Sachs analysts say in the research note. Their forecasts point to a price hike to just under € 250 per megawatt hour by the end of July.
Fatih Birol, executive director of the International Energy Agency (IEA), told CNBC that only a very small amount of new LNG will hit the market next year. “If the Chinese economy recovers, China’s LNG imports could increase along with those of Europe next year,” Birol said.