Record-high U.S. LNG exports have managed to mitigate so far the shock supply loss from Qatar, but American exporters are unlikely to continue running facilities at full capacity for all of this year as maintenance and hurricane season are likely to curtail some supply in the coming months.
Qatar’s LNG is offline, and so are the UAE exports, due to the closure of the Strait of Hormuz, where no LNG tanker has transited since the war began at the end of February.
Buyers are now looking at much more expensive LNG supply as the de facto closure of the Strait of Hormuz has trapped about 20% of daily global LNG flows.
While U.S. LNG has replaced the loss of Qatari supply since the war began, running U.S. export capacity at full throttle is not sustainable all year round, and the market will ultimately feel the supply squeeze.
The crunch is already evident in Asian and European benchmark gas prices soaring to three-year highs in March, prompting demand destruction in many price-sensitive buyers and leading them to turn to alternative fuels, including ramping up coal-fired power generation.
In nominal terms, U.S. LNG supply has offset all the losses from Qatar so far this year, with the 7 million-ton surge in American shipments exceeding the estimated 6.93 million-ton decline in Qatari exports, according to Kpler data cited by Reuters columnist Gavin Maguire. Related: BP Shares Up 20% Since Iran War, Leading All Supermajors
Between January and April, U.S. exports are set to jump by 28% from a year earlier to a record 32.15 million tons, according to the data.
Despite the Qatari outage, total global LNG exports are expected to increase by 6% to an all-time high of just over 149 million tons.
Supply may be higher, but the trade flows have materially shifted with Asia buying more spot cargoes – if buyers are willing to pay 40-50% higher prices than before the war, leaving Europe scrambling for supply in the April-October gas refill season.
Golden Pass LNG, the newest U.S. export facility, last week sent its first cargo, further raising total American capacity. But Golden Pass LNG, owned by ExxonMobil and QatarEnergy, is the only new U.S. LNG export terminal currently expected to begin LNG shipments in 2026, the U.S. Energy Information Administration (EIA) says.
In the coming months, some U.S. facilities will have to undergo maintenance, while the summer hurricane season could curtail some operations and loadings, exposing the global LNG market to further tightness. With Qatar’s LNG not returning online for months, and full capacity probably taking up to five years to resume, the market is looking very tight this year and next.
That’s in stark contrast to the outlook of the global LNG market prior to the Iran war. Before February 28, all analysts and forecasters expected an oversupplied market and a wave of new supply to weigh on prices and thus incentivize demand through the end of the decade.
After the war began, the market is now looking at demand destruction due to high prices, savings measures, and sputtering industries due to soaring energy prices.
Asia, in particular, is expected to see its LNG demand decline by over 10 million tons in 2026, for a second consecutive year, gas and LNG analysts at Wood Mackenzie said last week.
“The scale of the demand reduction in Asia is the critical factor to balance the Middle East LNG disruption,” said WoodMac’s David Lewis, Senior Research Analyst, Gas & LNG, and Lucas Schmitt, Principal Analyst, Short-Term LNG.
In Europe, LNG imports are set to be 13% lower than expected before the war, due to cargoes being pulled away to Asia, the analysts noted.
U.S. projects will offset part of the Qatari supply shock, but even assuming Qatari exports can resume by August 2026, global LNG supply will drop by at least 30 million tons per annum (mmtpa) this year, they said.
Regardless of the higher U.S. supply, the market will remain tight in the short and medium term.
The Qatari LNG halt and the damage to its key facilities will delay the previously expected LNG supply wave by at least two years, the International Energy Agency (IEA) said in its quarterly gas report on Friday.
“The combined effect of short-term supply losses and slower capacity growth could result in a cumulative loss of around 120 billion cubic metres of LNG supply between 2026 and 2030,” the agency noted.
“While new liquefaction projects in other regions are expected to offset these losses over time, the impact will prolong tight markets through 2026 and 2027.”
By Tsvetana Paraskova for Oilprice.com
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