Natural gas: Will persistent winter risk keep prices elevated? – Commerzbank

European gas prices face a winter of sustained pressure, with Commerzbank’s Norman Liebke warning that limited LNG supply and below-average storage will leave the region more reliant on flexible LNG volumes. Colder conditions or a fall in LNG imports could drive prices higher, the bank says. However, reduced EU gas demand and greater LNG capacity should help avert a repeat of the extreme price surges seen in 2022.

Could LNG constraints and low storage push prices higher?

"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.)