European natural gas prices are facing significant upward pressure, according to a new warning from Goldman Sachs. The bank argues that prices need to climb sharply to ensure the continent has sufficient reserves for the upcoming winter season.
Goldman analysts Samantha Dart and Laura Cyr said current price levels "will not be enough for Europe to manage storage through winter." The bank's base case for the Dutch TTF contract - the region's benchmark - is €50 per megawatt-hour for December 2026. However, they estimate that prices would need to rise by roughly 110% to above €100/MWh to incentivize the necessary injections into storage facilities.
European storage sites typically need to be refilled during the summer, when demand is lower and traders can buy gas for winter delivery. The price spread between summer and winter contracts creates the financial reason to store gas; without a steep enough rise in winter prices, there is little incentive to lock supply away in storage before the cold season. If the refill season ends with a deficit, there is no quick way to make up the lost volume before winter. This is why Goldman's warning centers on the December TTF price rather than the current front-month contract.
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The urgency stems from a slow refill season. At the present pace, Northwest European storage would be only 51% full at the end of the month, falling 3.4 percentage points short of Goldman's projection. That gap matters because winter demand will draw heavily on these reserves, and a shortfall could leave the region vulnerable to price spikes or supply shortages.
Adding to the strain is the ongoing conflict with Iran, which has severely disrupted shipping through the Strait of Hormuz - a critical artery for global LNG supplies. With fewer cargoes reaching the market, Europe is competing directly with Asia for scarce shipments, driving up costs.
Yet there is a potential mitigating factor. Rystad Energy noted that a "super" El Niño could raise temperatures by at least 2°C above normal, reducing heating demand and easing some of the pressure on storage. A mild winter would give Europe more breathing room, but relying on weather patterns is risky.
Goldman's warning underscores a delicate balancing act. The market has already reacted, with front-month futures climbing above €65/MWh last week - a five-month high. But the bank suggests that even this rally may not be sufficient to attract the needed LNG volumes if Middle East disruptions persist.
As the clock ticks toward winter, Europe faces a stark choice: pay substantially more for gas now to secure adequate reserves, or risk a more painful supply crunch later. For investors, the trajectory of prices will hinge on geopolitical developments and weather forecasts in the coming months.
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