European gas prices have remained surprisingly stable despite significant disruptions to Middle Eastern liquefied natural gas (LNG) exports. UBS analysts attribute this stability to increased LNG production outside the Middle East and weaker demand across Europe and Asia. Between March and September, Middle Eastern LNG supply dropped by about 60 billion cubic meters (bcm), but additional production from other regions, including 17 bcm from the United States, helped offset the loss.
Asian LNG imports fell by around 9 bcm year-on-year, while European imports declined by approximately 10 bcm. These reductions have limited immediate price pressures, but UBS warns that these offsets may not be enough as winter approaches and heating demand rises. European gas storage levels are currently about 15% below seasonal averages, with inventories expected to enter winter at 74% capacity and decline to around 25% by spring.
UBS estimates that Europe could need an additional 27 bcm of LNG during winter compared to summer months, with Asian demand potentially increasing by another 2 bcm to over 20 bcm. The bank has raised its fourth-quarter price forecast to €75 per megawatt-hour from €62, and its 2027 forecast to €45 from €40. This adjustment reflects expectations of a slower recovery in Qatari LNG exports and ongoing European efforts to phase out Russian gas.
Under a prolonged disruption scenario with colder weather, UBS anticipates fourth-quarter TTF prices averaging €90/MWh, with potential peaks near €120/MWh. Conversely, a faster recovery in Qatari shipments and milder temperatures could bring prices closer to €50/MWh. UBS expects LNG supply to recover more slowly than oil due to shipping, infrastructure, and contractual constraints.