The medium to long-term outlook for the European natural gas market is bearish. The ramping up of global LNG export capacity will push the global LNG market into surplus, putting further downward pressure on European gas prices. We expect TTF to average EUR30/MWh in 2026, with more downside in the second and third quarters.
However, in the near term (remainder of the 2025/26 winter), we believe the market will remain well-supported, and there is the potential for prices to move higher. This is due to the fact that EU gas storage is well below the five-year average, and we believe storage could end this heating season at around 25% full, reaching levels similar to those in 2022 and leaving the market more vulnerable. In addition, investment funds entered the 2025/26 winter with record short positions in TTF, which leaves the market at risk of a short covering rallying if we were to see any supply shocks or extended cold spells.
The EU ban on Russian gas, which will ultimately see Russian gas flows to Europe stopping by 1 November 2027 at the latest, should be manageable. The EU imported around 16bcm of Russian pipeline gas via Turkstream in 2025, while LNG imports from Russia totalled almost 20bcm over the year. The LNG ban will likely lead to an adjustment in trade flows, while replacing pipeline flows should also be manageable, given the ramping up of LNG export capacity.
Between 2025 and 2027, the US has around 93bcm of LNG export capacity scheduled to start up, while from late 2026, we should also see significant capacity start-ups from Qatar, ensuring more than adequate supply for the EU. How adequate this supply will be depends on how Asian LNG demand performs through 2026. Asian demand was weak last year, due largely to China, where high inventories, stronger pipeline flows and weaker consumption weighed on LNG demand. And with plans for further pipeline capacity into China in the medium to long term, Chinese LNG demand may remain more modest than initially expected.
The surplus environment that is expected means that the global LNG market may try to resolve the surplus by trading down to levels where we see US LNG plants reducing operating rates. Basically, we could see the market trading down to the short-run marginal cost (SRMC) for US LNG producers at times during the peak of the surplus expected in 2027 and 2028. This is a floating level which will depend on where Henry Hub is trading, but assuming Henry Hub trading around US$4/MMBtu (not too far from calendar 2027 prices), it would equate to around EUR18/MWh.
A key downside risk to our price forecasts would be a scenario where a peace deal between Russia and Ukraine ultimately sees the resumption of some Russian gas flows to Europe. While we believe a restart of Russian gas flows is unlikely, this scenario cannot be ruled out.
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