European gas prices could be significantly lower than forecast for next summer, Wood Mackenzie says, thanks to lower power plant demand and ample gas in storage.
According to Wood Mackenzie, Europe is in a good position with gas in storage heading into the winter of 2023/2024 – more than is typical for this time of year. These high inventories now combine with lower demand for gas from power generation, as nuclear power increases and inflationary economic hardships curb industrial and household consumption. And it may mean that Europe will escape another energy crisis.
That will have a “knock-on effect on prices next year,” according to Wood Mac, which added in a report Wednesday that gas in power generation is expected to fall 12% next year from a year ago. According to Wood Mackenzie, natural gas prices next summer could be as low as 20% of current estimates.
Compared to last year, gas prices are already low. Benchmark natural gas prices are a fifth of what they were at this time last year, with the EU-Dutch Natural Gas TTF (EUR/MWh) currently trading at $37.09.
Of course, it’s possible that Europe is in for a particularly brutal winter. But a mild winter had Morgan Stanley forecasting European gas prices at 15EU/MWh. In another scenario, the bank predicted that gas prices could rise to 100 EUR/MWh.