Goldman sees TTF at 105 euros, JKM at $35 if Gulf LNG stays tight

The difference between Goldman's base and risk scenarios is large, meaning the gas market is pricing a genuine two-way bet on flows through Hormuz. Any news of LNG loadings improving or halting could swiftly shift both benchmarks. Higher gas prices would lift coal where fuel-switching is feasible, connecting the gas story to wider energy demand. It would also feed into European inflation, a factor for central banks that are already deliberating over further rate increases. Oil traders should monitor the same shipping headlines, since the strait is a common risk for both crude oil and LNG.

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Previously:

• Oil gained at the Globex open as traders considered a Houthi missile attack on Riyadh

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Goldman states that gas prices this winter hinge on LNG shipments through Hormuz. If the recovery stalls, European and Asian benchmarks could reach levels that compel industrial users to reduce consumption.

In summary:

• Goldman Sachs repeated its view that gas prices face upside risk, forecasting that TTF and JKM will hit 105 euros per megawatt hour and $35 per million British thermal units by the end of the year if Persian Gulf LNG shipments do not pick up significantly this winter, based on normal weather.
• This contrasts with the bank's base scenario of 70 euros and roughly $25, which anticipates a gradual recovery in LNG flows through Hormuz.
• Goldman anticipates that the bulk of demand reduction will come from industrial users, who consume substantial amounts of natural gas.
• Discussions with Indian industrial clients indicate that $30 per MMBtu may be a key level at which further demand cuts occur.
• A shift from gas to coal may already be happening among some Chinese industrial consumers.
• LNG importers in Europe are projected to mostly pass elevated costs on to their customers.

According to Reuters, Goldman Sachs repeated its warning that gas prices in Europe and Asia could rise sharply if LNG exports from the Persian Gulf stay constrained. The bank stated that without a notable improvement in Gulf LNG shipments this winter, TTF and JKM could reach 105 euros per MWh and $35 per MMBtu by year-end, assuming typical winter conditions.

This is significantly higher than the base case of 70 euros and about $25, which counts on a gradual recovery in Hormuz LNG volumes. The gap between the two projections highlights how much depends on traffic through the Strait of Hormuz. Iran insists it has shut the strait, while US Central Command reported over the weekend that oil and LNG shipments via the waterway hit a six-month high in the last fortnight. The conflicting reports leave the situation uncertain.

Goldman foresees that the bulk of any demand destruction will be borne by industrial consumers, who use a lot of natural gas. The bank noted that its direct talks with Indian industrial users indicate that $30 per MMBtu could be a key trigger for further demand reduction. It also said some Chinese industrial users may already be switching from gas to coal. Regarding the supply chain, Goldman expects European LNG importers to mainly pass high costs along to downstream customers.

Goldman's own figures put the $30 level between the base case of about $25 and the risk case of $35, indicating that demand rationing would primarily occur in the risk scenario. The pass-through of costs in Europe has broader macroeconomic implications. ECB Governing Council member Yannis Stournaras stated last week that an October rate increase could not be excluded if energy prices jump, meaning a gas surge would directly influence that discussion.

The future path relies on the speed of recovery in Gulf LNG shipments and on winter temperatures, as Goldman's projections are based on average conditions. A consistent improvement in Hormuz flows would push prices towards the base case, whereas a halted recovery or a cold snap would increase upside risk. Market participants will monitor loadings figures, any new strikes on Gulf energy facilities, and the progress of regional discussions on shipping lanes.

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TTF and JKM: the two gas benchmarks in Goldman's outlook

TTF stands for Title Transfer Facility. It is the reference price for natural gas in Europe. It takes its name from a virtual trading point in the Netherlands, where gas is traded irrespective of whether it came via pipeline or as LNG. The most widely observed contract is the front-month future on ICE Endex, the Amsterdam-based ICE platform for European energy. Prices are denominated in euros per megawatt hour.

JKM stands for Japan Korea Marker. It is the reference price for LNG cargoes delivered to Northeast Asia, covering Japan, South Korea, China and Taiwan. In contrast to TTF, it is not a screen price from a single exchange. S&P Global Commodity Insights calculates it each day using spot cargo transactions and bids, and related futures and swaps are traded on exchanges such as CME and ICE. Prices are expressed in US dollars per million British thermal units.

Connection between the two: LNG is transported by ship, so a cargo can be sold to the region offering the highest price. This generally causes TTF and JKM to move together, and the spread between them indicates where flexible cargoes are flowing. When supply from the Gulf is tight, both markets compete for the remaining volumes, which is why Goldman forecasts them jointly.

Comparing units: One megawatt hour equals roughly 3.4 million British thermal units. Based on that, 105 euros per MWh translates to about 31 euros per MMBtu, or just above $35 at an exchange rate of around 1.15 euros to the dollar. The precise dollar amount varies with the currency rate. This demonstrates why Goldman's two year-end projections are aligned.

Significance: TTF determines the price of gas for European power companies, manufacturers and, ultimately, household energy bills. JKM serves as the price indicator for Asian importers competing for the same shipments.