Goldman Sachs says European gas prices expected to fall to 85 euros megawatt-hour in coming months
Krisztian Bocsi | Bloomberg | beautiful pictures
Goldman Sachs predicts natural gas prices in Europe will fall about 30% in the coming months as countries gain a temporary advantage in terms of supply.
The Dutch Transfer of Ownership Facility (TTF) is the main European standard for natural gas prices. It traded at around 120 euros per megawatt hour on Tuesday. But Goldman Sachs expects this benchmark to drop to 85 euros per megawatt-hour in the first quarter of 2023, according to a research note published last week.
This will mark a significant changes compared with levels seen in August. At that time, Russia’s unprovoked invasion of Ukraine and subsequent pressures on the European energy mix pushed prices to historic figures – above 340 euros per megawatt hour.
The recent cooling in gas prices is due to a number of factors: Europe’s gas storage is essentially full for this winter; temperatures this fall have been milder than expected thus delaying the start of the heavy use period; and there is an oversupply of liquefied natural gas (LNG).
Recent reports have shown about 60 ships waiting to unload their LNG in Europe. Some of these shipments were purchased during the summer and are now being shipped when the warehouse is full. Indeed, the latest data compiled by the European Gas Infrastructure industry group Shows storage levels in Europe are at 94%.
Despite optimism about a near-term drop in gas prices, which could alleviate some of the cost-of-living crisis, European leaders have plenty of pressure to secure supplies in the middle. term.
“Our commodities group forecasts a further decline to 85 euros in the first quarter before a sharp increase in the summer of next year as storage levels build up,” Goldman Sachs analysts said in a research note. again”. Their forecasts indicate that prices will soar to just under 250 euros per megawatt hour by the end of July.
Natural gas prices are expected to increase after the first three months of 2023 due to a number of factors.
Fatih Birol, executive director of the International Energy Agency, told CNBC’s Julianna Tatelbaum on Friday that only a very small amount of new LNG will hit the market next year. “If China’s economy recovers, next year China’s LNG imports may also increase along with Europe,” he said.
China is the world’s leading LNG importer in 2021, according to the US Energy Information Administration. However, due to its strict Covid-19 policy, China’s economy has faced several stalemates that have slowed growth. Any change in this political approach would increase demand for LNG and push up prices for European buyers.
In addition, gas reserves have been supported by Russian supplies that the EU is trying to reduce. Even Xavier Bettel, the prime minister of Luxembourg, an EU country, admitted in October that the warehouse was full of Russian gas. Russian supplies have since been severely disrupted, and Europe’s goal is to go completely free of Russian fossil fuels.
CEO of EDPThe Portuguese utility company, summed it up when speaking to CNBC’s “European Squawk Box“Friday.” We are certainly in a much better place than we were a few months ago,” said Miguel Stilwell d’Andrade, but “we should expect more volatility in the future.” “
