Europe will end the winter with higher-than-expected gas inventories due to mild weather, which will provide relief to the region grappling with a historic energy crisis, according to the latest report from Goldman Sachs Group.
Efforts to conserve energy, coupled with weak Chinese imports of liquefied natural gas, mean that gas stocks in Europe will be nearly 30% full at the end of March, up from a previous forecast of 21% to 23%.
This gives the old continent more leeway to rebuild gas supplies over the summer for next winter, Goldman Sachs analysts wrote.
“Summer is when storage needs to be built. The challenge of once again getting inventories to at least 90% under these circumstances will, in our view, renew the sense of urgency to destroy demand.”
Goldman cut its forecast for European natural gas prices for the summer to 180 euros ($186) per megawatt-hour, down 55 euros from a previous forecast. European benchmark futures closed at 124 euros on Tuesday.
Exceptionally mild weather experienced in northwestern Europe since October has led to a steep drop in gas prices sooner than Goldman expected, analysts said.
Europe is grappling with a fuel shortage after Russia cut gas supplies to the continent due to the bloc’s support for Ukraine. While Europe has been able to restock for this winter, next year will be much more challenging without the flow of Russian gas and potentially more competition from China for fuel.