My base case is an ongoing reversion to mean for global gas and coal prices. But the risk of another price spike is more than a tail risk. Goldman with the note.
Lower Gas Prices For Now, But European Energy Crisis
Not Over YetEven though natural gas is used all year to generate electricity and support industrial processes, natural gas demand in the northern hemisphere is heavily seasonal, with NW European heating-related demand nearly doubling the amount of gas consumed in winter vs summer. This makes guaranteeing that there is enough gas in storage the primary driver of natural gas markets, and helps explain why prices were so high last year. The Russian supply deficit last summer required an offset somewhere else so that European gas storage would still reach near-full levels ahead of the start of the winter. With fuel substitution between gas and coal/oil nowhere near enough to make up the difference, gas prices had to climb high enough to curb industrial demand and attract incremental LNG imports, a successful — if painful — market rebalancing process.
