Four years ago Europe was scrambling to replace 40% of its gas imports after being cut off from Russian pipelines amid the war in Ukraine. It turned to Qatar, then the world’s biggest producer of liquefied natural gas (LNG).
“We’ve been reliable for more than 26 years,” the Gulf state’s energy minister, Saad al-Kaabi, boasted at the time in his gilded office. “We have never missed a shipment.”
Politicians seem more worried about diesel than gas. That is complacent, for the real LNG test is yet to come. Some buyers are delaying purchases in the hope that prices will come down. Many others are desperately betting on new sources of LNG that would reduce their dependence on the Gulf. Both wagers carry risks. If they do not pay off, this may become clear only when it is too late. Start with the short term. This year, however, European buyers have let Asia snap up most of the Atlantic cargoes that usually come their way. Some still hope for a swift end to the war (never mind that another American flotilla is on course for the Gulf). Most, though, are counting on a mild winter courtesy of El Niño, a weather pattern that lifts temperatures in Europe. Forecasters predict a late start to the heating season. A lot is riding on the accuracy of the forecasters’ models. In three of them storage would run so low that withdrawals could slow and emergency measures would be needed.
It has since shipped just 98 cargoes, 536 fewer than in the same period last year. The shortfall is 39m tonnes, 9% of last year’s global supply, and counting. At around $25 per million British thermal units (mmBtu), LNG prices in Asia are 140% higher than before the war (see chart 1). Optimists, or whoever passes for one in the circumstances, point out that this is still far below the peak of $70 in 2022—even though a sixth of the world’s supply is out of action. Asia, which used to receive over 80% of Qatari exports, has managed to secure almost as many cargoes as it typically needs from America, Australia, Malaysia, Nigeria and other producers. Asian LNG imports of 193m tonnes so far this year are just 7m below the same period in 2025 (see chart 2). This explains why in 2022 gas prices peaked in August. Europe’s gas storage is just 72% full, the lowest on record at this time of year, compared with an average of 90% in 2022-25 (see chart 3). Germany’s currently stands at 57%.
In March, when Iran closed the Strait of Hormuz after being attacked by America and Israel, Qatar declared force majeure and told buyers it could not fulfil its contracts. Summer is normally when European utilities “build fat for the winter”, in the words of one trader. Today that boast sounds hollow. Six One Commodities, an energy merchant, ran the past ten winters’ weather through its computer model to see how much gas Europe would have left by spring if it started with today’s reserves.
On September 30th the German government ordered a state-owned importer to secure eight extra terawatt-hours of gas capacity, equivalent to eight LNG cargoes, by December 15th. And spot prices for delivery right away are above futures prices. So most importers have little incentive to stockpile. If the weather stays warm and if Qatari flows normalise by December, Europe will get by and gas prices will fall, reckons Zhi Xin Chong of S&P Global, a data firm. If the cold persisted, competition with Asia would intensify. In a truly severe winter, warns a Singaporean former energy official, “there may be no ceiling to the price. And any problem elsewhere on the electricity grid—empty hydro reservoirs, an unexpected shutdown of nuclear reactors, a Russian attack on Europe’s energy infrastructure—could lift prices sky-high.
But the European Commission seems in no hurry to reinstate its requirement, relaxed owing to the war, for utilities to top up storage to 90% by November (if it did, and governments piled into the market, they would need to pay over the odds). Analysts reckon that an unexpectedly nippy November could cause prices to jump to $30-40 per mmBtu amid a European rush to secure cargoes.
Both are uncomfortably big “ifs”.
Its hunt for supplies would push prices up during all of 2027. From rigs to riches The Gulf crisis has put paid to the notion, entertained by most LNG-watchers before the war, that the global market would tip into surplus in 2026. American liquefaction capacity alone is expected to nearly double by 2030. All told, new projects could boost annual global supply to as much as 630m tonnes by 2030, a rise of nearly 60% on last year’s levels. At the same time demand will grow more slowly than pre-war forecasts suggested (see chart 4). Either way, LNG prices could fall below $6 per mmBtu, according to analysts.
As for Qatar, it has yet to restart its liquefaction plants. This suggests it does not think peace is around the corner. If its supplies do not return soon, Europe will need an extra 20m tonnes of LNG to restock before winter next year. Yet many of the new LNG projects on which this notion was predicated remain on course. Hints of an eventual mega-glut could be discerned at Gastech, an annual industry gabfest held last month in Bangkok. Over four days an A-list of exporters—developers, energy majors, state-owned giants—showcased new projects using flat-screen mosaics and tanker replicas. Traders roamed the floor locking in future cargoes. Equipment makers filled their books with orders from far-flung clients. Importers were chasing new contracts now, and worrying about overbuying later. Canada’s will soar, too. The advent of smaller, modular liquefaction units is opening gas deposits in countries—from Argentina to Senegal—that once lacked the infrastructure to host LNG projects. Some countries, including China, have cancelled plans for new import terminals, worried that another geopolitical crisis could leave them high and dry. Many are restarting coal-fired power plants, launching ambitious renewable-energy tenders and reconsidering nuclear power. If Qatar restarted pumping at full tilt and all the planned projects were to materialise, this would create a 55m-75m-tonne mismatch between supply and demand. Balancing the market would then mean someone producing below capacity, someone buying in excess of need, or both. That is lower than the cost of lifting cargoes under most long-term contracts. Large utilities, such as Japan’s JERA and Germany’s Uniper, are acquiring trading staff, storage and regasification units so they can sit on excess purchases and resell when the price is right. Project developers, wanting to capture more margin, are cutting out middlemen and setting up their own trading desks. Oil-and-gas majors are signing deals left and right to become one-stop shops for smaller clients. The result could be legions of traders selling to each other, or to end-users already amply supplied. Some would be left holding cargo they cannot sell, racking up losses. Capital providers may grow overly cautious. The immediate consequences of the gas crisis are potentially bad enough. The knock-on effects could keep the market out of whack for years to come.
Perversely, the more severe the crunch now, the bigger the potential oversupply down the line, says Aimie Parpia of Six One Commodities. The watchword was “diversification”. Expectations of persistent price volatility have emboldened developers to press ahead with new supply that seemed less certain earlier this year, says Massimo Di Odoardo of Wood Mackenzie, a consultancy. Wary of a testy few years ahead, buyers and sellers are chasing “optionality”.
Rystad Energy, another consultancy, forecasts annual demand of 574m tonnes by the end of the decade, down from 583m tonnes before the war.
