Citi Sees LNG Damage Risk Driving Europe’s Gas Outlook

Citi says an escalation of Middle East conflicts could cause sharp swings in European natural gas prices in 2027, depending on damage to liquefied natural gas facilities. Its scenarios put 2026-27 winter prices for the TTF benchmark at €85 per megawatt-hour if facilities remain intact, and about €154 if they are hit and knocked offline.

Combining the scenarios, Citi estimates a price of about €103 per megawatt-hour if conflict escalates. TTF was around €95 when the bank’s analysis was made. Without an escalation, Citi expects prices to range from €60 to €70.

Citi says current prices imply roughly a 25% chance of LNG facilities being struck. The bank questioned whether markets are properly assessing that infrastructure risk, citing improving relations between Iran and Qatar. It also said the course of the conflict remains difficult to predict.

Citi’s data show that TTF contracts for 2028 rose about 60% over the past three months, approaching levels seen in 2022, when the Russia-Ukraine war began. The bank said investors may be accounting for LNG facilities remaining out of service for months or years. Closing positions opened on expectations of falling prices may also have supported the rise.

For the US benchmark Henry Hub, Citi sees greater upside potential than for TTF if severe cold or a polar vortex occurs. Winter prices have fallen sharply, while fund managers’ bets on further declines are among the highest levels seen since early 2020.