Goldman Sachs sees European gas prices more than halving by winter-end
US investment bank Goldman Sachs predicts that European wholesale natural gas prices will more than halve to under €100/MWh ($1,065/'000 m3) by the end of the first quarter of next year, assuming typical winter weather, in a marked contrast to previous forecasts of current high prices continuing into the 2023 injection period.
Goldman Sachs had previously predicted €213/MWh prices by the end of March. The October contract at the Dutch TTF hub is currently trading at €239/MWh, having seen a sustained rally from €191/MWh on September 12.
European countries have "successfully solved" the risk of supply shortages this winter, having so far filled their storage facilities to close to 85% of capacity, as increased LNG imports and demand destruction have countered the impact of steep cuts in Russian supply over recent months, including as a result of the Nord Stream 1 (NS1) pipeline's indefinite closure at the end of August.
"The indefinite reduction in NS1 exports to zero leaves north-west Europe without any Russian gas going forward. And while we often hear the question of what this will do to storage, we believe a better approach is to ask what this will do to prices, so that storage continues to build as needed," Goldman Sachs said in a report on September 13.
Storage facilities should reach 90% utilisation by the end of October, Goldman Sachs predicted, and they should remain over 20% full by the end of March next year.
"This, in our view, will set the stage for the sense of urgency to destroy demand we see currently to be gradually replaced by a sense of market relief for having made it through winter," the bank said.
The report comes after the European Commission backed away this week from a proposal to impose a price cap on Russian gas, while going ahead with other measures including a windfall tax on oil and gas companies, and on power generators that do not use gas. Some EU member states had wanted the cap to be applied on all gas supplies and not just Russian volumes, while others voiced concern that Moscow could retaliate by cutting gas flow to the bloc completely.