LNG

China’s push to build out its coal-to-gas (CTG) industry will curb reliance on imported LNG. Targeted to reach 28 Bcm/year of synthetic gas production by 2030, Beijing’s CTG program equates to roughly 20 mtpa of pipeline‑quality gas that can substitute for imported LNG.

Suspension of nearly 10.2 mtpa of Qatari LNG supply to Asia is forcing utility buyers to switch to coal, with an additional 150 million tonnes (Mt) of consumption projected through 2030, roughly half of which in 2026 alone. A supply gap, not green policies, is driving demand, with RystadEnergy anticipating an LNG shortfall of 35 million tons this year.

An US-Iran peace deal resolution is expected “very soon,” Pakistan’s foreign ministry says – which would hit future prices immediately – but physical LNG and oil flows, deliveries, and broader supply normalization would lag by weeks, Rystad Energy cautions.

The United Arab Emirates’ decision to leave OPEC is ushering in a more volatile oil market, with implications for LNG pricing – particularly in Asia, where many contracts remain indexed to crude benchmarks.

Fracking activity is ramping up across the U.S. as producers cater to booming LNG export demand and seek to pre-empt service price spikes. Early movers can reap superior margins.

With more than 12 million barrels of oil equivalent per day (boepd) of Middle East crude oil and LNG production taken offline due to the Iran war, Russia emerges as the clear winner of global supply shortages. US President Trump’s sanctions relief for Russia’s short-term oil was meant to ease supply disruptions, but had little effect.

A review of the EU’s Arctic policy running through March 16, 2026, places fresh emphasis on gas from Norway’s Barents Sea which could lower Europe’s reliance on LNG imports. The resource base is substantial: The parts of the Barents Sea already open to exploration, according to Norwegian Offshore Directorate estimates, hold around 3.5 billion barrels of oil equivalent (boe) of natural gas, or about 22 trillion cubic feet.

If the Brent crude oil market begins to “flirt with contango,” OPEC+ will likely cut production, Rystad reckons. The primary goal of oil and gas producers remains maintaining a backwardated market structure, with crude prices impacting oil-indexed gas and LNG contracts.

Escalating tensions between Israel and Iran have pushed up crude oil prices to nearly $75 per barrel. The geopolitical risk premium has soared to around $8 per barrel, impacting oil-indexed natural gas contracts as well as term LNG deliveries.

The outlook hinges on Iran’s response. If the regime in Teheran keeps airstrikes focussed on Israeli military sites, as seen in past episodes, price increases may remain contained and temporary, Rystad analysts reckon. But if Iran escalates by disrupting crude oil and LNG shipments through the Strait of Hormuz, or attacks regional energy infrastructure, prices could go through the roof.

In an undisguised threat, US President Donald Trump warned the Iranian regime to stay clear on attacking American military bases in the Middle East, or face dire consequences. 

Nautical chokepoint

The Strait of Hormuz – a key nautical route between the Mediterranean and the Red Sea – is the chokepoint in this scenario. Around 12 million barrels per day of crude oil pass through the strait, over 80% of it bound for Asia. Additionally, over 3.5 billion cubic feet (bfc) of natural gas, or 18% of world shipments, travel through the strait onboard of LNG tankers.

Though there is a pipeline to bypass the Strait of Hormuz, the capacity of that pipeline is limited. Saudi Arabia’s East-West oil pipeline and the UAE’s Habshan-Fujairah oil pipeline together can handle around half of the flow. As for natural gas, the Abqaiq-Yanbu pipeline runs parallel to the East-West Petroline in Saudi Arabia, bypassing the Strait of Hormuz. Its capacity is 290,000 barrels per day, carrying primarily gas liquids.

To date, Iran never succeeded in blocking the Strait of Hormuz which is jointly controlled with Oman. Past tactics included seizing or harassing tankers by jamming their GPS signals to draw them into Iranian waters.

“If Iran were to attempt a full-scale blockade of the Strait, it would likely face strong international pushback,” Rystad head of geopolitical analysis Jorge León warns. Retaliatory actions are to be expected particularly from countries of the Gulf Cooperation Counci, comprising Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates.

Even Iran’s key ally, China, would be hit hard by higher oil and LNG prices, he underlined, stressing such a move would isolate Iran politically and economically.

Beware shipping rates

Peter Sand, Xeneta chief analyst takes a similar view: “Any closure of the Strait of Hormuz would see services re-routed, with increased reliance on India West Coast ports for connecting the Far East to Indian sub-continent,” he noted. The inevitable disruption and port congestion, as well as the potential for higher oil prices, would cause a spike in ocean freight container and LNG shipping rates.

Average spot rates from Far East to North Europe are up 62% since early December 2023, just before escalation in the Red Sea, while average spot rates to US East Coast – another trade that would ordinarily transit the Suez Canal – are up a staggering 165%, analysts pointed out.

Financial markets do not trust the Kremlin’s agreement to a limited ceasefire in the war in Ukraine: Prices for oil, natural gas and gold prices increased on the news, even though the ceasefire is meant to put an end to attacks on energy and infrastructure for 30 days.

The agreement, brokered by the U.S. President Donald Trump initiated negotiations with his counterpart Vladimir Putin during a nearly two-hour phone call clearly disappointed energy traders: Many had expected Trump to find a “quick resolution” of the war as the precondition of an eventual restart of Russian gas transits through Ukraine prior to this winter.

Market’s immediate reaction was disappointment, and prices mirrored that: After falling during the day, yesterday oil prices increased by more than $0.5 per barrel on the news. 

Similarly, gold prices increased by $3 per ounce, while TTF front-month prices also went up from €43.50 to €43.64 per megawatt-hour (MWh).

“The likelihood of an imminent increase in Russian oil and gas supplies in the market has decreased,” commented Rystad’s head of geopolitical analysis, Jorge León. Instead, he a permanent peace agreement will now have to be set out “through small steps over a longer period.”

Russian gas exports to Europe ‘unlikely to return’

Analysts agree that Russian gas exports to Europe are “unlikely to return,” and some hedge funds have cut positions at the Dutch TTF after amplifying price swings increased their value at risk (VaR). Technical buying will restart, Energy Aspects reckons, once prices TTF front-month fall to the low €40s per MWh.

Expiry on a gas transit contract between Russia’s Gazprom and Naftogaz Ukrainy has left Europe short of 15.4 bcm per year of Russian pipeline gas. A painful shortfall, yet a far cry from the 174 billion cubic metres per year (bcm/y) that Gazprom had exported to Europe exported five years ago.

Efforts of the European Commission to bridge the gap have diverted away from Russia and focus on the Caspian region instead. Azerbaijan’s President Ilham Aliyev promised last autumn the country will raise natural gas exports to the European Union this year to 13 bcm and 20 bcm/y potentially by 2027, though analysts caution bottlenecks on pipeline transit capacity could lead to a lengthy ramp up.

Turkey’s TSO Botas and Bulgartansgas also increased capacity at the Strandzha 1 entry point, allowing for larger flows from the Caspian Sea region. Botas’ role in facilitating Europe’s energy security is gaining ground: If Azeri or Turkmen gas supplies were absent, the EU could fall short of nearly 7.2 Bcm of gas per year and would need resort to importing LNG at a higher price to avert supply risks.