Goldman expects gas prices in Europe to fall sharply

Natural gas prices in Europe will more than halve over the next six months as the continent enjoys a successful winter without Russian gas, according to Goldman Sachs analysts.

In a note to clients, Goldman analysts said they expect benchmark prices for Northwest Europe to fall to around 100 euros per megawatt/hour "sequentially" in the first quarter of next year, assuming average winter temperatures. The forward price curve currently still forecasts prices around 200 euros, while the delivery price in October was around 192 euros. These forecasts are based on the view that Europe has already done the hard work to prepare for the peak demand season, filling storage faster than usual with aggressive purchases of liquefied natural gas (LNG) on the global market to replace imports no longer coming through Russian pipelines. In addition, the extremely high prices seen in the spot market this summer have led to a significant reduction in demand, especially from industrial customers. "Heading into the winter season, we expect the high storage levels at the start of the season to absorb larger than average resource utilization from storage," the analysts said, adding that they expect EU storage facilities to be 20% full by the end of March. As a result, analysts argued that "a sense of relief in the market that we are through the winter" will replace the current "sense of a collapse in demand". But even at 100 euros, prices will be around six times what they were a year ago, posing a major threat to the competitiveness of European industry and the spending power of consumers. Follow Global Economic Developments on Social Media! Click here to follow Ieconomy official Facebook account! Click here to follow Ieconomy official Instagram account! Click here to follow Ieconomy official Twitter account!