European Natural Gas Restocking Risk Rising; Morgan Stanley Warns TTF Could Reach €90

Investing.com - Morgan Stanley warns that after confirming that two large-scale liquefied natural gas (LNG) production lines at Qatar Ras Laffan facilities have suffered long-term damage, Europe’s natural gas reserves are at an increased risk of insufficient replenishment this summer.

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In a new report, the bank states that it has adjusted the “benchmark scenario to Scenario 4—predicting TTF will reach €90/MWh in summer,” which implies about a 45% upside potential compared to the current forward curve.

Analyst Charlotte Firkins said that this damage is equivalent to “a supply shock of about 13 million tons per year or 3% over the next three years in the global market,” adding that the event “to some extent decouples natural gas prices from the Strait of Hormuz situation.”

Morgan Stanley currently expects a 15 million ton shortfall in global LNG supply by 2026.

Although Europe’s fundamentals remain relatively loose in the near term, the bank states that “the risk of summer storage replenishment has increased.”

To ensure sufficient natural gas supply, “TTF must price to attract spot cargoes to Europe during summer,” with the next catalyst being “rising tightness in the summer physical market.”

Morgan Stanley mentions a possible “rush to buy LNG cargoes in June/July” and warns that such buying could push TTF prices up to €90/MWh.

The bank also notes that European governments may need to “re-subsidize reserve capacity bookings to encourage replenishment.”

Additionally, the bank suggests that if Ras Laffan’s shutdown continues into June or longer, prices could return to “2022 levels of €100-200/MWh or higher.”

Morgan Stanley has also raised its 2027 forecast to about €45/MWh, citing long-term tightness caused by Qatar’s production losses and delays in Qatar expansion projects.

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