China's Natgas Destocking Set to Boost LNG Imports, Drive Up European Gas Prices

Goldman Sachs has issued a warning about potential disruptions to European gas prices due to China's destocking of natural gas. The bank believes that China's April gas demand was lower than expected, missing its forecast by 8 billion cubic meters per year (Bcm/y). Despite the weaker demand, China's gas storage levels are below last year's at this time.

This has led Goldman Sachs to conclude that higher liquefied natural gas (LNG) imports will be necessary for China to manage its inventories ahead of the next winter. The bank expects TTF prices to potentially reach 65 euros per megawatt-hour in the third quarter and 53 EUR/MWh in the fourth quarter this year, if energy flow normalization in the Strait of Hormuz is delayed until late July.

The Asia LNG price premium to European gas remains strong, incentivizing supply re-routes from the Atlantic to the Pacific. Goldman Sachs advises gas consumers in Europe and Asia to hedge their winter exposure.