Goldman Sachs Lowers Summer U.S. LNG Supply Expectations, Keeps European Gas Price Forecast

Overview

This report analyzes the impact of geopolitical conflicts, particularly the situation involving Iran and the Strait of Hormuz, on the global flow and supply efficiency of U.S. liquefied natural gas (LNG). Although Asia has driven prices higher due to potential losses of Qatari LNG, attracting U.S. LNG transshipments to Asia, longer shipping routes have extended delivery cycles and reduced effective supply. Goldman Sachs has accordingly lowered its expectations for U.S. LNG supply this summer, but believes the European market will be limited in impact due to mild weather and stable pipeline gas, keeping its original forecast for the European gas benchmark (TTF) unchanged.

Core views

Asian premium drives trade flow changes: As Asia is the main region affected by potential disruptions to Qatari LNG, Asian LNG prices (JKM) have risen more than European natural gas prices (TTF). Since the start of the Iran conflict, the JKM-TTF spread has averaged USD 0.57/MMBtu above the incremental shipping cost of diverting U.S. LNG to Asia rather than Europe. This spread is sufficient to incentivize U.S. LNG shippers with destination flexibility to optimize their portfolios by rerouting in-transit cargoes or planned routes originally bound for Europe toward Asia. Longer shipping times suppress effective supply: U.S. LNG shipments to Asia take significantly longer than those to Europe or elsewhere in the Atlantic basin (about 39 days to Asia vs. 16 days to Northwest Europe). As the share of shipments to Asia increases, the average shipping time for U.S. LNG rises, causing the delivery-to-feedgas ratio to decline. Data show that as the share to Asia rises, this ratio tends to fall, meaning that for the same feedgas volume, actual completed deliveries decrease. Summer supply expectations lowered: Based on the above logic, Goldman Sachs reassessed U.S. LNG supply capacity. While a simple model suggested deliveries could be 12 million tons/year lower than expected, accounting for data noise, improvement in the April delivery ratio, and the baseline assumption that Hormuz LNG flows normalize by end-Q2, Goldman moderated the negative impact to an average of 5 million tons/year. Therefore, this summer's U.S. LNG supply expectation is lowered to an average of 127 million tons/year (mtpa). European storage and price forecasts maintained: Despite the lower U.S. LNG supply expectations, the impact on Europe is offset by other factors. Recent weather in Northwest Europe has been milder than normal, and pipeline gas supply has been slightly above expectations, so Goldman still expects Northwest European storage to reach 82% by end of October (only a marginal tweak, largely flat). Based on this, Goldman maintains its 3Q and 4Q 2026 TTF price forecasts at EUR 44/MWh and EUR 40/MWh, broadly consistent with the forward curve (EUR 44/43/MWh).

Analysis framework

The report adopts a framework combining supply-demand balances with logistics efficiency. First, it compares the JKM-TTF spread with incremental shipping costs to determine the economic driver of trade flows. Second, it uses historical data to observe the correlation between the share of shipments to Asia, shipping duration, and the delivery-to-feedgas ratio, quantifying the drag from logistics bottlenecks on actual supply. Finally, it incorporates adjusted supply volumes into the European inventory balance, considering weather and pipeline gas variables, to derive the impact on end-period inventory and prices. This transmission analysis from micro logistics efficiency to macro market balance is key to understanding short-term natural gas market fluctuations.

Methodology notes

• Industry/Industry Analysis FrameworkSupply-demand framework

  Global LNG market arbitrage and flow mechanism

  By analyzing price differentials between regions (e.g., Asia JKM vs. Europe TTF) and transport cost differentials, the optimal flow of LNG cargoes is determined. When the price spread covers transport costs, traders will divert cargoes to the higher-priced region, altering regional supply-demand balances.

• Industry/Industry Analysis FrameworkUpstream-to-Downstream Transmission

  Impact of logistics efficiency on effective supply

  In the LNG industry, shipping distance directly affects vessel turnaround times. Shipping to more distant markets (e.g., Asia) extends voyage duration, reducing the frequency of deliveries per unit of time and thus decreasing effective supply reaching destination markets for the same feedgas volume.

Key data

• JKM-TTF spread premiumUSD 0.57/MMBtuAverage since start of Iran conflict, above incremental shipping cost to Asia
• U.S. LNG supply expectation downward revision5 million tons/yearAverage summer supply expectation cut
• Adjusted summer U.S. LNG supply expectation127 million tons/yearPost-cut average supply level
• End-October Northwest European storage forecast82%Broadly maintained, supported by mild weather and pipeline gas
• 3Q26 TTF price forecastEUR 44/MWhMaintained
• 4Q26 TTF price forecastEUR 40/MWhMaintained
• U.S.-to-Asia LNG shipping duration39 daysSignificantly longer than 16 days to Northwest Europe

Impact & implications

The report argues that while geopolitical tensions have raised market concerns about supply disruptions and caused trade flows to reorganize, market mechanisms (price arbitrage) and physical constraints (shipping time) together have made the actual impact milder than initially feared. For the European market, despite reduced flexible LNG supply from the U.S., support from non-LNG factors means the energy safety margin (inventory) has not significantly deteriorated, and prices will remain relatively stable. This implies the market has partly priced in geopolitical risks, and physical logistics bottlenecks are becoming the main factor limiting supply elasticity.

Risks

• Further deterioration of the Strait of Hormuz situation causing more severe supply disruptions
• Abnormally cold European weather driving demand surge
• Unexpected outages at U.S. LNG production facilities
• Data noise causing estimation bias in delivery ratios

What to watch

• Ongoing changes in the JKM-TTF spread
• Share of U.S. LNG shipped to Asia and shipping duration data
• Northwest European storage refill progress
• Normalization of LNG flows through the Strait of Hormuz