Analysts Forecast "Lower for Longer" Prices in LNG Market

• MUFG Bank forecasts a surplus of LNG supply by 2025, primarily driven by a surge in supply from the US and the Middle East, potentially leading to lower prices and the end of the energy crisis.
• Qatar aims to leverage its position as the world's lowest-cost LNG producer to increase market share despite the approaching oversupply conditions, while the US emerges as the top LNG supplier to the EU following the Nord Stream pipeline incident.
• Oversupply conditions are expected to alleviate energy inflation in the West, although the situation may change towards the end of the decade.

The beginning of the Russian-Ukraine war in early 2022 led to a significant tightening in global liquefied natural gas (LNG) supplies as Europe replaced lost Russian LNG with supplies from the US. Currently, LNG markets are stabilizing and, according to one commodity desk, could enter an oversupply period in 2025. In a note to clients, a team of analysts led by Ehsan Khoman, who is in charge of the commodities research desk at MUFG Bank, said the global LNG market is on the verge of transitioning from tight to oversupplied: 

When factoring in LNG export capacity currently under construction in the US (and other regions), we anticipate ~200mpta of additive global LNG supply capacity before the end of this decade (constituting ~50% of the 409mpta global LNG supply currently ). To put the sheer velocity of this additional supply into context, global LNG demand printed at 401mpta in 2023. This LNG oversupply, beginning to take shape from 2025, leads to risks that global gas prices may decline to around supply cash costs (~EUR15 - 20/MWh), which may lead to the cancellation of US LNG exports (akin to 2020).