Natural gas and coal prices to stay higher for longer

We’ve raised our near-term natural gas and coal price forecasts across the board this week to account for the recent slump in Russian natural gas exports to Europe, the likelihood that those exports will remain low, and the knock-on effect that higher gas prices has on coal prices. We now forecast that the European gas price will end this year and next year at around €250 per MWh and €150 per MWh, respectively. But, if Russia decided not to reopen the Nord Stream 1 pipeline after a scheduled three-day period of maintenance at the end of this month, then we would almost surely raise our forecasts further still.

Looking ahead, the China PMIs out next week are likely to show that the country’s manufacturing sector contracted at a faster pace in August than in July due to power rationing, which could weigh on metals prices. But later in the week, our US Economics team expects non-farm payrolls to increase by an above-consensus 350,000 in August, which would be broadly supportive of commodity prices.