European Gas Prices May Surge 30% by Late 2026
Bank of America warns of a 30% spike in European gas prices by Q4 2026 due to critically low storage levels and winter demand.
European energy markets are bracing for a significant price shock. According to a recent report from Bank of America (BofA), gas prices across the continent could skyrocket by approximately 30 per cent above current market expectations during the fourth quarter of 2026.
This projected spike is largely driven by a looming supply crunch as the region prepares for the winter season with gas storage levels hitting their lowest points in more than a decade.
A Sharp Increase in Energy Costs
The financial institution anticipates that between October and December 2026, European gas prices will average around 250 pence per therm, which translates to roughly 100 euros per megawatt-hour. This would represent a massive jump of nearly 60 per cent compared to the preceding quarter.
Key findings from the BofA report include:
- Price Deviation: The bank's base case scenario for 4Q26 sits about 30% higher than the current forward curve price of approximately $200 per barrel of oil equivalent (boe).
- Storage Concerns: As of early October, European gas storage levels were recorded at 73 per cent. This is a notable decline compared to the 83 per cent recorded during the same period in the previous year.
- Winter Demand: Lower storage reserves are expected to exert intense upward pressure on prices as households and industries ramp up demand for heating during the colder months.
Gas Outpacing Oil Prices
A significant trend noted in the report is that European gas prices have begun to move above Brent crude prices on an energy-equivalent basis. BofA expects this trend to persist through the final quarter of 2026, signaling a shift in the energy landscape where gas becomes a more volatile and expensive driver than oil.
While the outlook for gas is aggressively bullish, the bank's stance on crude oil is relatively more conservative. BofA expects Brent crude to average around USD 100 per barrel in the fourth quarter of 2026. For the full year of 2026, Brent is projected to average USD 91.6 per barrel, with a further drop to USD 80.3 per barrel in 2027.
Impact on Energy Producers
The anticipated surge in gas prices is expected to create a windfall for certain sectors of the energy industry. Bank of America continues to favor exploration and production (E&P) companies that are more sensitive to gas price fluctuations rather than oil prices, as rising costs are likely to bolster their earnings.
The bank estimates that aggregate earnings for the companies it covers will be roughly 10 per cent higher than what the market currently expects. Furthermore, organic cash flow estimates are projected to be 14 per cent above the market consensus. Ultimately, the financial health and cash flow of these energy producers will hinge on how gas prices behave during the critical winter heating season.