Citi says European gas prices could stay vulnerable to sharp increases in 2027 if conflict returns to the Middle East. The bank puts Dutch TTF winter 2026-27 at €85 per megawatt-hour if conflict escalates but liquefaction facilities remain unscathed, and around €154/MWh if LNG facilities are hit.
European natural gas prices could remain vulnerable to sharp increases in 2027, Citi analysts said, as markets weigh renewed conflict in the Middle East and potential damage to liquefied natural gas infrastructure.
Two escalation scenarios for Dutch TTF
The bank estimates that benchmark Dutch TTF winter 2026-27 prices could reach €85 per megawatt-hour if the conflict escalates but liquefaction facilities remain unscathed. Prices could climb to around €154/MWh if LNG facilities are hit and taken out of service.
Weighting the probability of both scenarios, Citi estimates a price of about €103/MWh in an escalation scenario. The prevailing price was around €95/MWh at the time of its analysis. Without an escalation, prices could instead trade in a €60-€70/MWh range.
Longer-dated contracts rally
Citi said prices across the winter 2026-27, 2027 and 2028 contracts appeared to reflect similar probabilities of an escalation, alongside roughly a 25% chance of liquefaction facilities being struck. However, the bank questioned whether the market was accurately assessing the risk of infrastructure damage, citing improving relations between Iran and Qatar.
Calendar 2028 TTF prices have risen around 60% over the past three months, according to Citi. The move is unusual for contracts so far into the future and has brought prices close to levels seen in 2022, following the outbreak of the Russia-Ukraine war. Markets could be pricing in the possibility that LNG liquefaction facilities are damaged and remain offline for months or even years, alongside some short-covering.
Citi sees more upside in Henry Hub
Meanwhile, Citi sees greater risk-adjusted upside in U.S. benchmark Henry Hub gas prices than in European TTF if severe cold weather or a polar vortex materialises. Winter Henry Hub prices have fallen sharply, while speculative positioning among managed-money investors is among the shortest levels seen since early 2020.
Diplomatic efforts involving Qatar, Saudi Arabia and China, as well as developments surrounding Israeli elections, remain important factors that could influence the outlook, Citi said.
Source: Commodities & Futures News
Trading involves risk.
Risk Disclaimer
