European gas prices may stay elevated this winter as LNG disruptions persist: Goldman Sachs

European natural gas prices have surged around 70% since July as disruptions to Middle Eastern LNG supplies coincide with low gas storage levels in Northwest Europe. Goldman Sachs Research expects European LNG prices to average €70/MWh in the fourth quarter of 2026, although a faster recovery in Persian Gulf exports could trigger a sharp decline.

According to Goldman Sachs Research, European LNG prices reached €73/MWh on September 21, compared with the €30-€60/MWh range seen before this summer. Prices have remained volatile amid changing developments around the conflict in the Middle East, including a recent selloff of more than 10%.

Goldman Sachs expects prices to average €70/MWh in the fourth quarter, raising its earlier forecast of €53/MWh. Samantha Dart, co-head of Global Commodities Research at Goldman Sachs, said the higher forecast reflects the need for demand destruction caused by the recent rally to continue through the coming months.

Persian Gulf LNG exports remain at only around 15%-25% of pre-war levels, according to the bank. Without an improvement in flows through the Strait of Hormuz, European prices may need to rise further to compete with LNG buyers elsewhere.

Winter weather could amplify price swings

The outlook will also depend heavily on temperatures as Europe's heating season approaches in November. Goldman Sachs estimates that winter temperatures can alter natural gas demand by around 12% of storage capacity.

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Gas storage in Northwest Europe has been filling more slowly than expected. Assuming winter temperatures remain around the 10-year average, Goldman Sachs expects inventories to be only 19% full by the end of March 2027.

The bank estimates that a winter one standard deviation colder than average could push its average winter price forecast up by around 75%. Conversely, a winter one standard deviation warmer could lower its winter price assumption by about 30%.

European gas market outlook

Faster LNG recovery could trigger sharp price fall

The risks to prices are not one-sided. Goldman Sachs estimates that if a new US-Iran agreement leads to higher LNG flows through the Strait of Hormuz, European prices could fall rapidly.

In such a scenario, peak winter prices could reach around €50/MWh, significantly below current levels, with prices potentially falling further in early 2027.

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Goldman Sachs noted that LNG flows through the Strait had previously risen from about 10% of normal levels to 39% within four weeks following a June memorandum of understanding between the US and Iran.

Longer-term LNG supply could weigh on prices

Goldman Sachs also expects a substantially different picture over the longer term. New LNG production capacity being developed in the US and Qatar could leave global LNG markets increasingly oversupplied.

The bank forecasts European natural gas prices could decline to an average of €19/MWh during 2030-2035. However, that longer-term outlook depends on the Strait of Hormuz remaining open and LNG flows normalising.

For now, Goldman Sachs said European industrial users have largely paused hedging because current winter prices are unattractive, while investors remain cautious about taking outright long positions given the possibility of a sudden reversal in prices.

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