Summary of European Natural Gas Outlook 2026/2027 Industry Overview - The European natural gas market has undergone significant changes due to the Russia-Ukraine war, leading to a sharp decline in Russian pipeline supplies to Europe, with Russian flows to Northwest Europe (NWE) falling to zero in September 2022 after the Nord Stream pipeline explosions [1][2][3] - Currently, TurkStream is the only remaining conduit for Russian pipeline gas to Europe, accounting for about 10% of pre-war average volumes [1][2] Key Points and Arguments Storage Levels and Prices - Europe entered the winter season with natural gas storage levels at 83% (79% in NWE), significantly lower than previous years [2][3] - Despite low inventories, European natural gas prices have remained stable, attributed to rising global LNG supply [2][10] - Forecasts predict TTF prices to average 28.75 EUR/MWh in 2026 and 24.75 EUR/MWh in 2027, which are 3-4 EUR/MWh below current forward prices [2][73] LNG Supply Dynamics - The abundance of US LNG is diminishing the importance of storage in Europe, with the US emerging as a key supplier and pricing point for global natural gas [2][21] - Global LNG export capacity is projected to increase by 70 Bcm/year in 2026 and 66 Bcm/year in 2027, leading to lower global gas prices [20][21] - NWE is expected to absorb 60% of new LNG capacity from upcoming export projects without exerting upward pressure on global LNG prices [46] Demand Trends - NWE natural gas demand is expected to remain flat, driven by renewable energy expansion, energy efficiency improvements, and electrification of heating [22][23] - Gas-for-power demand has seen a year-over-year decrease of 3%, primarily due to robust renewable generation [23][29] - Industrial natural gas demand in NWE is estimated to be 18% below 2021 levels, with limited recovery signs [33][36] Russian Gas Supply Outlook - Total Russian natural gas deliveries to Europe are projected to decline to approximately 36 Bcm in 2025, down from 150 Bcm in 2021 [53] - TurkStream is expected to deliver about 16 Bcm in 2025, with long-term contracts primarily to Hungary and Slovakia [57][58] - The resumption of Ukrainian gas transit is anticipated to be a significant negotiation point in any ceasefire discussions, with volumes potentially reaching 15 Bcm/year by mid-2027 [69] Additional Important Insights - The market's bearish sentiment persists despite various bullish factors, primarily due to the anticipated increase in global LNG supply [19][70] - The EU's sanctions on Russian LNG, effective from 2026, may lead to a gradual phase-out of Russian gas, with Hungary and Slovakia negotiating exceptions for their long-term contracts [67][68] - The overall outlook suggests that supply availability will dominate market dynamics, with expectations of oversupply conditions as new LNG projects come online [74]