Goldman Sachs: Gas market will remain volatile due to structural changes

Although conditions in the European and global gas markets have calmed considerably in recent weeks, the battle is not over yet. According to analysts at investment bank Goldman Sachs, the market will remain exposed to the risk of high volatility due to structural changes, despite the expected increase in global export capacity for liquefied natural gas (LNG), particularly in the second half of this decade.

Following the unprecedented drop in natural gas supplies from Russia over the course of last year, Europe became dependent on liquefied natural gas (LNG) deliveries. As a result, according to Samantha Dart, head of gas market research at Goldman Sachs, the local gas market is far more exposed to future developments in other global markets, particularly the US market.

“It is lower now, but this volatility will return. And it will return because this market has structurally changed,” Dart said.

Although gas prices in the US market doubled last year due to high global demand for LNG, they averaged around 9 USD/MMBtu, or just under 30 EUR/MWh, still significantly lower than in Europe. Prices in the US market were temporarily pushed down by the several-month unplanned outage at the Freeport LNG terminal, one of the country’s largest LNG export terminals. However, strong domestic production and relatively low demand during the winter pushed prices back below 3 USD/MMBtu.