Gulf LNG Exports Stay Low, Winter Prices Face Upside
Persian Gulf LNG shipments remain 75-85% below normal, keeping winter European and Asian gas prices vulnerable to spikes.
Key points
- Persian Gulf LNG exports remain at 15-25% of normal levels, limiting supply flexibility.
- Winter price risks point to TTF reaching €105/MWh and JKM hitting $35/mmBtu.
- Long-term forecasts predict a glut with TTF near €19/MWh by 2030-2035.
Persian Gulf liquefied natural gas exports remain severely constrained, averaging only 15% to 25% of pre-conflict levels during July and August. This persistent supply deficit has left European and Asian markets exposed to significant price volatility, with traders positioning for a tight winter season rather than a rapid normalization of flows.
Corporate participants at the Gastech Conference in Thailand indicated a broad consensus that the disruption will extend through the winter months. This outlook creates direct upside risk for benchmark prices, with potential for the Title Transfer Facility (TTF) to approach €105/MWh and the Japan-Korea Marker (JKM) to reach $35/mmBtu if supply does not recover.
Supply recovery lags oil market trends
Goldman Sachs projects that Gulf LNG exports will gradually recover to approximately two-thirds of normal levels by January 2027. This timeline is notably slower than the oil market, which has already achieved similar recovery levels. The difficulty in rerouting LNG cargoes stems from fixed shipping schedules and terminal constraints, making the fuel less flexible than crude oil in response to geopolitical shocks.
This structural lag means that the physical scarcity will persist longer than commodity traders may have initially anticipated. The inability to quickly redirect existing cargoes leaves a window of vulnerability where any further geopolitical friction could exacerbate price spikes before the longer-term oversupply materializes.
Regional price dynamics favor Europe short-term
Europe is currently capturing a larger share of flexible US LNG cargoes due to current price differentials. However, this advantage is contingent on the spread between JKM and TTF prices. If the JKM-TTF spread widens, supply is likely to be redirected toward Asia, which would exert upward pressure on both regional benchmarks simultaneously rather than isolating the price impact to one region.
Asian demand destruction sets price floor
Asia is expected to bear the brunt of demand reduction during the tight period. Indian industrial users face a critical threshold of approximately $30/mmBtu, above which consumption is likely to be curtailed significantly. This demand destruction acts as a natural brake on price escalation, but only after prices have risen to levels that force industrial customers to cut back on usage.
The immediate winter squeeze exists in stark contrast to the longer-term outlook. Goldman Sachs forecasts a substantial LNG glut between 2030 and 2035, with TTF averaging near €19/MWh and JKM around $7.15/mmBtu. This divergence highlights the temporary nature of current price pressures against a backdrop of expected global oversupply in the coming decade.
