European natural gas prices are expected to remain high throughout the upcoming winter, largely due to ongoing disruptions in Middle Eastern liquefied natural gas (LNG) supplies and slower-than-anticipated gas storage replenishment in Northwest Europe. Goldman Sachs Research has revised its forecast, predicting that prices will average €70 per megawatt-hour (MWh) in the fourth quarter of 2026.
Significant Price Surge and Revised Forecast
Since July, European gas prices have climbed by approximately 70%. Goldman Sachs' latest projection of €70/MWh for Q4 2026 marks a considerable increase from its earlier forecast of €53/MWh. As of September 21, 2026, European LNG prices stood at €73/MWh, significantly above the €30-€60/MWh range observed before the summer.
Samantha Dart, co-head of Global Commodities Research at Goldman Sachs, indicated that the elevated forecast reflects the necessity for demand destruction, triggered by the recent price rally, to persist in the coming months.
Key Factors Driving Elevated Prices
- LNG Supply Disruptions: Exports of LNG from the Persian Gulf continue to operate at only 15%-25% of pre-war levels. Without a substantial improvement in flows through the Strait of Hormuz, European prices may need to rise further to remain competitive with other global LNG buyers.
- Slow Storage Builds: Gas storage facilities in Northwest Europe have been filling at a slower pace than anticipated. Goldman Sachs estimates that, assuming average winter temperatures, inventories will only be about 19% full by the end of March 2027.
Winter Weather and Market Volatility
The severity of the upcoming winter will play a critical role in price stability. Goldman Sachs analysis suggests that winter temperatures can alter natural gas demand by roughly 12% of Europe's total storage capacity. A winter one standard deviation colder than average could push the bank's average winter price forecast up by around 75%, while a warmer winter could reduce it by about 30%.
Prices have also remained volatile amidst evolving developments related to the conflict in the Middle East, including recent periods of significant market selloffs.
Potential Downside and Long-Term Outlook
Despite the current upward pressure, the market is not without potential for price declines. Goldman Sachs estimates that a faster recovery in LNG flows, possibly triggered by an agreement between the US and Iran leading to increased throughput in the Strait of Hormuz, could cause European prices to fall rapidly. In such a scenario, peak winter prices could drop to around €50/MWh, with further declines possible in early 2027.
Looking further ahead, Goldman Sachs anticipates a different market landscape. New LNG production capacity coming online in the US and Qatar is expected to lead to a globally oversupplied market. The bank forecasts European natural gas prices could decline to an average of €19/MWh between 2030 and 2035, contingent on the Strait of Hormuz remaining open and LNG flows normalizing.
For the immediate future, European industrial users are largely pausing hedging strategies due to unattractive current winter prices, and investors remain cautious about long positions given the risk of sudden price reversals.