Global natural gas and LNG market Report Interpretation

Overview

This conference-based natural-gas note examines how market participants view the Persian Gulf LNG disruption, winter supply-demand adjustment, and long-term LNG contracting. Goldman Sachs finds broad support for near-term price upside if flows through Hormuz remain constrained, but continues to expect substantial global LNG oversupply later in the next decade.

Core views

Goldman Sachs reports that corporate participants at Gastech largely expect the Persian Gulf LNG-export disruption to persist through winter. In the absence of meaningful improvement in those exports, the institution expects TTF and JKM to reach 105 EUR/MWh and $35/mmBtu, respectively, by year-end under average winter weather. Those levels are materially above its base case of 70 EUR/MWh for TTF and $24.85/mmBtu for JKM, which assumes a gradual improvement in Hormuz LNG flows. Persian Gulf exports averaged only 15%-25% of pre-war levels in July and August; the base case assumes they gradually recover to two-thirds of normal by January 2027. A slower recovery, potentially prolonged by military attacks, would create a larger winter LNG deficit and require higher prices to suppress demand. Cargo-routing dynamics are a central near-term variable. US suppliers said most flexible cargoes are currently heading to Europe rather than Asia, consistent with a still-low JKM-TTF premium. However, the spread has recently approached the shipping-cost threshold at which US exporters would be incentivized to divert cargoes to Asia. Goldman Sachs argues that stronger Asian LNG demand pushing the spread above this threshold would intensify competition for flexible cargoes and create additional upside risk to both TTF and JKM forecasts in the base and upside scenarios. The report expects the necessary demand adjustment to fall primarily on Asia rather than Europe. Europe typically represents about 30% of global LNG demand, versus more than 60% for Asia, and Goldman Sachs notes that significant European gas demand was already destroyed during the 2022 energy crisis. Northwest European industrial gas demand had fallen 23% by 2023 versus 2021 and then stabilized, whereas Asian industrial gas demand was about 7% above 2021 in 2023. The institution estimates that more than 30 mtpa of demand destruction could be required in a low-supply winter scenario to help Europe manage inventories, assuming average weather. August trade data already suggest at least 15 mtpa of LNG demand destruction outside Europe at prevailing prices. Industrial demand is expected to be the most price-sensitive part of the adjustment. Some market participants identified $28-$30/mmBtu, equivalent to 85-90 EUR/MWh, as an important JKM threshold for industrial demand destruction in India; Goldman Sachs's direct discussions with Indian industrial users similarly point to about $30/mmBtu as a trigger for additional cuts. Demand destruction could occur too slowly if Asian governments subsidize gas consumption, which would push global LNG prices higher. The report sees limited scope for large-scale gas-to-oil switching because distillate prices are also tight and diesel was already about 115 EUR/MWh on a gas-equivalent basis. It does see signs of gas-to-coal switching among Chinese industrial users, as industrial LNG use declined year on year after the July-August TTF and LNG rally despite robust Chinese industrial activity, including chemicals. On Europe, Goldman Sachs agrees with most clients that physical shortages are unlikely because high TTF prices should attract LNG and European importers can largely pass high costs downstream. A colder-than-average winter remains the key concern. The institution found no evidence from Northwest European companies or storage data of government-forced storage injections beyond what supply and demand would imply. The longer-term conclusion differs sharply from the near-term price view. Clients still expect the current disruption ultimately to end and to be followed by global LNG oversupply. Goldman Sachs agrees and says recent US LNG project final investment decisions imply softer long-term balances than it expected before the Iran war. It cut its 2030-2035 average TTF forecast to 19 EUR/MWh from 30 EUR/MWh and its JKM forecast to $7.15/mmBtu from $10.60/mmBtu, both below forward prices in the case of TTF. It judges risks to those long-term price forecasts as skewed downward, while acknowledging high uncertainty over the many intervening winters and the unresolved Middle East disruption. The disruption is also reshaping contracting. Buyers retain Qatar as a long-term supplier but are increasingly considering diversification, with US LNG viewed as the likely marginal beneficiary and further contract announcements anticipated. European long-term contracting is being impeded by uncertainty around EU methane measurement, reporting and verification requirements for overseas LNG production. The rules apply from January 1, 2027 to EU import contracts signed on or after August 2024; penalties for non-compliance have been delayed to 2030. Goldman Sachs believes reduced European long-term contracting need not reduce eventual LNG imports, but it leaves Europe more exposed to spot-price volatility. US liquefaction fees remain largely unchanged at $2.50-$2.75/mmBtu, reinforcing the market view that the disruption is temporary; the institution expects Brent indexation in future Qatar LNG contracts may decline versus pre-war terms as buyers price disruption risk.

Analysis framework

Goldman Sachs combines Gastech client discussions with LNG-flow, trade, price-spread, storage and sector-demand data. It assesses winter prices through Persian Gulf supply scenarios and the price level needed to reroute cargoes or reduce demand, then contrasts that near-term shortage framework with long-term LNG project supply and forward-curve implications.

Methodology notes

• Industry AnalysisSupply-demand framework

  Winter LNG balance analysis

  The report links constrained Persian Gulf exports, flexible-cargo routing and demand destruction to the LNG deficit and resulting TTF and JKM price scenarios.

• Industry AnalysisUpstream-Midstream-Downstream Transmission

  LNG cargo-routing and end-user demand response

  Goldman Sachs traces how the JKM-TTF spread affects US cargo destinations and how higher gas prices are transmitted to industrial LNG demand, fuel substitution and European import costs.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• TTF

  European gas benchmark exposed to winter LNG supply disruption and competition for flexible cargoes.

  Strengths

  High prices are expected to attract LNG into Europe and reduce the likelihood of physical shortages.

  Weaknesses

  The base case depends on a gradual recovery in Persian Gulf LNG flows.

  Comparison

  The 105 EUR/MWh low-flow scenario is above the 70 EUR/MWh base case; the 2030-2035 average forecast is 19 EUR/MWh.

  Risks

  A colder-than-average winter, slower LNG-export recovery, or stronger Asian bidding could lift prices further.

• JKM

  Asian LNG benchmark exposed to supply disruption, industrial demand destruction and cargo competition with Europe.

  Strengths

  Asian price strength could attract US flexible LNG cargoes if the JKM-TTF spread exceeds diversion costs.

  Weaknesses

  Higher prices are expected to suppress industrial demand, particularly in Asia.

  Comparison

  The $35/mmBtu upside scenario is above the $24.85/mmBtu base case; the 2030-2035 average forecast is $7.15/mmBtu.

  Risks

  Demand destruction may be delayed by subsidies, potentially requiring still higher prices.

• US LNG

  Likely beneficiary of buyer diversification and prospective long-term LNG contracts.

  Strengths

  Flexible cargoes can be redirected between Europe and Asia, and buyers are showing greater interest in diversification toward US supply.

  Weaknesses

  Long-term global oversupply is expected to soften gas and LNG balances.

  Comparison

  US liquefaction fees remain largely in the $2.50-$2.75/mmBtu range, unchanged from pre-war levels.

  Risks

  Long-term supply additions may contribute to the oversupply Goldman Sachs expects.

Key data

• TTF upside winter scenario105 EUR/MWhExpected peak winter price if Persian Gulf LNG supply remains constrained.
• JKM upside winter scenario$35/mmBtuExpected peak winter price in the low Persian Gulf LNG-flow scenario.
• TTF base case70 EUR/MWhAssumes a gradual improvement in Hormuz LNG flows.
• JKM base case$24.85/mmBtuAssumes a gradual improvement in Hormuz LNG flows.
• Persian Gulf LNG exports15%-25% of pre-war levelsAverage export level during July-August.
• LNG demand destruction neededMore than 30 mtpaEstimated requirement under a low winter LNG-supply scenario to help Europe manage inventories, assuming average weather.
• Demand destruction already indicatedAt least 15 mtpaAugust trade data suggest this amount is already occurring outside Europe at current prices.
• India industrial LNG demand threshold$28-$30/mmBtuClient estimates identify this range as important for industrial demand destruction; Goldman Sachs cites about $30/mmBtu from direct discussions.
• 2030-2035 TTF forecast19 EUR/MWhReduced from 30 EUR/MWh.
• 2030-2035 JKM forecast$7.15/mmBtuReduced from $10.60/mmBtu.
• US LNG liquefaction fees$2.50-$2.75/mmBtuReported as largely unchanged from pre-war levels.

Impact & implications

The report distinguishes a near-term market in which constrained Persian Gulf supply can force LNG prices materially higher from a later market expected to face excess supply. It also suggests that US LNG may gain from buyer diversification, while limited European long-term contracting could increase the region's dependence on volatile spot markets.

Risks

• Military attacks could delay the recovery of Persian Gulf LNG exports and deepen the winter LNG deficit.
• A colder-than-average European winter could increase shortage concerns and LNG demand.
• Asian government subsidies could delay LNG demand destruction and push prices higher.
• The timing and scale of the expected long-term LNG oversupply remain highly uncertain.
• Uncertainty over EU methane compliance responsibilities may continue to constrain European long-term LNG contracting.

What to watch

• Persian Gulf LNG export volumes and whether flows recover toward two-thirds of normal by January 2027.
• The JKM-TTF spread relative to the cost of diverting US LNG cargoes from Europe to Asia.
• Asian industrial LNG demand, especially whether prices near $30/mmBtu trigger further reductions in India.
• European winter weather, storage behavior and signs of government intervention.
• New US LNG contract announcements and project final investment decisions.
• Implementation clarity for EU methane measurement, reporting and verification requirements.