UBS Raises European Gas Price Forecasts

UBS has raised its European gas price forecasts for Q4 2024 and 2025, citing heightened geopolitical risks and supply constraints, even amidst weak market fundamentals.

Key Highlights

• Price Increases:
  • Q4 2024 gas price forecast increased by 4% to $13.5/mmBtu (€42/MWh).
  • 2025 forecast raised by 2% to $11.8/mmBtu; in euro terms, expected slight decline to €36/MWh.
• Storage Capacity: European gas storage nearing full capacity at 93% as of September 2024.
• LNG Dependence: Increased reliance on liquefied natural gas (LNG) imports expected due to constrained piped gas supply.

Geopolitical Impact

• Ongoing geopolitical tensions, particularly related to Ukraine's gas transit, contribute significantly to revised price forecasts.
• Weather Variables: UBS estimates that extreme weather fluctuations could swing gas demand for heating by around 14%.

Global Market Dynamics

• Tightening global gas market driven by delays in new LNG projects; higher global prices anticipated.
• Asia & US Prices: Upward adjustments made for Asian spot LNG prices and Henry Hub forecasts.

Conclusion

• UBS highlights the delicate balance of demand, weather patterns, and the ongoing risks in the geopolitical landscape impacting European gas prices well into 2025.