Because Goldman Sachs estimates gas prices will drop by more than half

Because Goldman Sachs estimates gas prices will drop by more than half

Because Goldman Sachs estimates gas prices will drop by more than half

European countries have finished building up their large gas stocks for the winter, which will result in a price drop that could drop below 100 euros per MWh according to the US bank.

Will winter be less severe than expected? A few weeks after the first frost, the tension on the gas market drops. Despite threats to shut down the Russian tap, the wholesale market price fell again after the peak reached at the end of August.

On the delivery contracts for 2023, the price of natural gas has in fact dropped from 297 euros per MWh to less than 200 euros in recent days. A price that is still high if you understand it at 85 euros a year ago but which now seems to be in a bearish trend.

This is what Goldman Sachs bank estimates on Tuesday, which assures European countries can resist Russia’s gas cuts this winter. The analyst said supply problems may have been “successfully solved” and now expects prices could more than halve this winter.

While Goldman Sachs expected a price of around € 213 per MWh for the winter in early September, its new forecast shows a price below € 100 by Q1 2023.

As Russia’s Gazprom has cut off supplies to Europe in recent months, European countries have rushed to fill their storage facilities, driving up the price of gas.

Bigger stocks

A race that has paid off, however, as Goldman Sachs analysts now predict that storage facilities will be 90% full by the end of October on average, more than 80% initially expected by EU countries. .

“This is the puzzle Europe has successfully solved over the past year, the analyst believes. Thanks to a combination of declining gas demand in Europe and liquefied natural gas buyers in other parts of the world, with resulting in an above-average accumulation of stocks “.

What to spend all winter if the latter is not too extreme in terms of climate. The US bank expects inventories to remain over 20% full by the end of March next year.

“This, in our view, will set the stage for the sense of urgency to depress demand that we are currently seeing gradually being replaced by a sense of market relief at having survived the winter,” analysts said.

While Russia accounts for only 9% of the continent’s gas supplies, the EU has reportedly given up on imposing a cap on the price of gas from Vladimir Putin’s country.

If this fall in the price of gas is confirmed, it could in turn lead to that of electricity. The price of the latter is the result of a complex calculation that takes into account not the real cost of production but the marginal cost of the last MWh produced on the network. However, with the reduced electricity generation capacity and strong demand, this marginal cost of the last MWh will be set by the production of gas-fired power plants. A fall in the latter would therefore automatically lead to an equivalent fall on the electricity market.

Federico Bianchi

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