European gas prices are likely to move higher in the second quarter as supply disruptions and shifting liquefied natural gas (LNG) flows tighten the region’s market, Goldman Sachs said.

The bank estimates that roughly 80 million tonnes per annum (mtpa) of LNG supply—around 19% of global supply—is currently offline following the halt in flows through the Strait and the shutdown of Qatar’s LNG production site.

“LNG flows through the Strait of Hormuz… have been at zero since the early days of the Iran conflict,” strategists led by Samantha Dart.

Although northwest European storage has remained relatively resilient so far, supported by mild weather and steady LNG imports, Goldman Sachs expects a shift in fundamentals.

More seasonal temperatures and increasing LNG diversions toward Asia are set to tighten European physical balances in the coming weeks, while higher prices have already driven gas-to-coal switching, reducing regional gas demand by more than 20 million cubic meters per day (mcm/d).

The strategists said this tightening “can drive a further rally in prompt TTF prices,” with current levels around 51 EUR/MWh seen moving into the 57–84 EUR/MWh oil-switching range.

Goldman reiterated its second-quarter TTF forecast at 63 EUR/MWh, noting current prices may be sufficient to balance the market if Qatari supply normalizes by early May, but could need to move higher to ensure further demand destruction if disruptions persist.

Options to offset the supply shock appear limited. Goldman noted there are “no re-routes for LNG that previously crossed the Strait of Hormuz,” while potential increases in Norwegian gas output or operational adjustments elsewhere are unlikely to materially offset the loss.

Price signals are already impacting flows. Asian LNG benchmarks have risen above European prices, encouraging cargo diversions, with the bank estimating that at least 10 mtpa of LNG supply is being rerouted from Europe to Asia.

At the same time, European inventories remain low. Storage levels are at 18% of capacity, the lowest for this time of year since 2018, and injections are expected to remain limited in April, with Goldman estimating a build of around 0.6 bcm, roughly 84% below April 2025 levels.
Absent a quick resolution to the conflict, “imminent physical tightening” in Europe is likely to act as a catalyst for further price gains in TTF, the strategists said.
Source: Investing.com