Natural gas: Prices stay high as winter risk persists – Commerzbank

Commerzbank’s Norman Liebke warns that European gas prices are set to remain elevated this winter as constrained LNG supply and below-average storage levels increase reliance on flexible LNG volumes. The bank highlights upside price risks tied to colder weather or weaker LNG imports, but also notes lower EU gas demand and expanded LNG capacity as factors preventing a repeat of 2022’s extreme price spikes.

LNG constraints and storage risks

"European gas prices are likely to remain elevated this winter due to stronger competition for LNG, while low gas storage levels and the resulting greater dependence on high LNG imports could create further upside risks. A colder winter or a decline in LNG imports, for example, could push prices even higher. However, the situation is not without hope: consumption remains below the levels of previous years, and a warmer winter in North America and Asia could provide additional relief to the market."

"Looking ahead to next year, we expect prices to decline significantly to around EUR 50 per MWh, largely reflecting an easing of the conflict in the Middle East. However, we do not expect gas prices to return to pre-war levels. While the capacity expansion in 2027 should make up for the production shortfall in 2026, supply from Qatar is likely to remain constrained until 2028 due to the medium-term loss of 17% of capacity."

"As gas storage levels are comparatively low, European inventories are unlikely to be sufficient to see the region comfortably through the winter, even with lower consumption. This combination of reduced LNG supply and low storage levels means that Europe is now more dependent on flexibly available LNG volumes during the winter. According to our calculations, under normal winter conditions and with normal LNG deliveries of around 11 billion cubic metres per month, European gas storage levels would fall to around 22% by the end of March next year."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)