US-Iran Agreement Paves Way For European Storage Refill

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US-Iran Agreement Paves Way For European Storage Refill

Goldman Sachs Natural Gas Analyst

We had been emphasizing in recent client conversations that European gas markets had

been at a crossroads. The loss of Qatari LNG supply was never sustainable for European

gas markets owing to the need for gas storage to refill ahead of the winter, especially

given the strong rebound in Asia LNG demand since May (Exhibit 1). So, either LNG flows

through the Strait of Hormuz would start to normalize to allow European gas storage to

refill, or TTF would have to rally to get it done by discouraging Asia LNG demand.

Exhibit 1: Low European gas storage and an ongoing Asia pull for LNG cargoes at the expense of Europe would likely lead

to a further rise in TTF without a Hormuz flow normalization

NW European Storage (lhs) vs Global Ex-Qatar LNG Loadings to Asia vs to Europe (rhs)

Bcm 2023 2024 2025 2026 5yr ave

60 Capacity

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Source: Bloomberg, Kpler, Goldman Sachs Global Investment Research

The recently announced agreement between the US and Iran potentially allows for the

former, leading us to keep our 2H26 TTF forecast largely unchanged at 41 EUR/MW (vs

42 EUR/MWh previously, and forwards at 42 EUR/MWh).

Specifically, we now assume LNG flows through the Strait of Hormuz normalize (short of

the 13 mtpa long-term damage to Qatari export capacity) by end-Jul, a month later than

our previous end-Jun expectation. However, higher ex-Qatar supply and a lower market

target for European storage offset the tightening effect from a later reopening.

First, global LNG supply ex-Qatar has risen more than we expected, primarily driven by a

combination of apparent maintenance avoidance in places like Oman, Malaysia and