Natural Gas: Volatile winter as Persian Gulf LNG stays scarce – ING

ING’s Warren Patterson highlights that European natural gas (TTF) prices have reached their highest level since December 2022 as Persian Gulf LNG flows remain down about 80% year-on-year. He expects Asia and Europe to keep competing for spot cargoes, with low European storage and forced German buying supporting prices. ING now forecasts TTF to average EUR73/MWh over the 26/27 winter before an aggressive sell-off from 2Q27.

European gas prices and LNG outlook

"European natural gas prices have traded at their highest level since December 2022, with supply concerns growing as the region heads into the heating season. Unfortunately for the natural gas market, we have not seen a similar recovery in LNG flows from the Persian Gulf as we have with oil. Therefore, LNG flows from the region remain down about 80% year-on-year."

"The market is increasingly accepting that Persian Gulf LNG could remain largely absent from global markets for much of the Northern Hemisphere winter. This means Asia and Europe will continue competing for spot cargoes throughout the winter, keeping prices well supported and leaving the market vulnerable to further spikes."

"European gas storage remains a concern, at just under 75% full, well below the five-year average of 89%. Low storage has seen the German government instruct state-owned SEFE to buy and store an additional 8TWh of natural gas by 15 December. The prospect of essentially forced buying provides further support to the market."

"With little sign of an imminent recovery in Persian Gulf LNG supply, weather will be crucial this winter, and there is growing expectation that Europe will experience a winter of milder temperatures due to El Niño, which would provide some relief to the market. However, it is not a strong relationship, and El Niño does not guarantee milder temperatures."

"We now expect TTF to average EUR73/MWh over the 26/27 winter, up from a previous forecast of EUR65/MWh. The market will likely be very volatile over this period, given the lower starting point for gas storage. Prices are then expected to sell off aggressively from 2Q27 as Persian Gulf supply normalises, and we see a further ramp-up in US LNG export capacity."