According to forecasts, gas prices in Europe may surpass $4,000 per 1,000 cubic meters.
Europe's gas futures prices are currently extremely volatile. Experts predict they may rise above the record high of $4,000 per 1,000 cubic meters in the near future.
In the current situation, gas prices have every chance of extending gains. On March 14, European gas prices exceeded $3,000 per 1,000 cubic meters for the first time in history. LNG prices approached $4,000 but failed to overcome this level. As a result, the quotes settled near $3,892 per 1,000 cubic meters. The current price of natural gas is four times higher than in February when it traded at $950 per 1,000 cubic meters.
Such price dynamics can be attributed to sweeping Western sanctions on Russia. The market has to price in a possible disruption of supplies from the country. Experts fear that the Russia-Ukraine conflict may result in damage to the natural gas pipelines and transport infrastructure.
After hitting the all-time high, gas futures saw a three-fold decline. On March 11, they were trading below $1,300 per 1,000 cubic meters. m. The sanctions focus shifted towards oil and oil products. At the same time, European leaders recognized that it would be impossible to quickly find a replacement for Russian gas.
High volatility in the market is fueled by current geopolitical uncertainty. A tightening of sanctions may trigger a sharp jump in LNG prices. Experts fear that Europe's inventories of gas could be depleted. Notably, storage volumes are around 10% below normal levels.
Since the summer of 2021, the spot gas market has been going through hard times. Thus, any negative news factor may lead to strong upside momentum and accordingly new price records.
As for long-term forecasts, gas prices are expected to trade in the area of $1,000 per 1,000 cubic meters by the end of 2022. Interestingly, at the end of the summer, the value of a gas contract exceeded $600, and in early October it was already $1,000 per 1,000 cubic meters.
Experts believe that growth in LNG prices stems from such factors as growing demand in Asia, limited supply from major exporters, as well as low filling levels of European gas storage facilities.
