Goldman Sachs warns: Falling LNG prices may ignite global battle for supply

According to a latest article, Bloomberg features that as winter approaches, Europe appears on track to replenish its liquefied natural gas (LNG) reserves, but a warning from Goldman Sachs has raised concerns. While current prices may keep Europe ahead of the game, experts caution that a dip in prices could spark fierce global competition, threatening the region’s energy stability.

Samantha Dart, co-head of global commodities research at Goldman Sachs, highlighted the delicate balance in Europe’s LNG strategy. “We think that prices have to stay at current levels, or slightly above, in order to kill LNG demand outside of Europe,” Dart said in an interview on Bloomberg television. “If LNG gets too cheap this summer, you tend to see other buyers picking it up.”

This year, Europe has seen an increase in LNG shipments, partly driven by reduced demand from Asia. China, the largest LNG importer last year, has cut back significantly on purchases due to high inventories, stronger pipeline imports, and elevated spot prices, which have made LNG shipments less economical. However, Dart noted that this trend could reverse if LNG prices drop low enough to make shipments more attractive to Asian markets again.

As of now, European gas storage levels are below normal, but recent price easing has offered some respite. Typically, Europe uses the summer months to rebuild its inventories in preparation for peak winter demand.

Looking to the future, Dart anticipates a significant influx of new LNG supply, primarily from the US and Qatar, which will create an oversupply in the market beginning in 2027 and increasing over the following decade.

“We think having cheap natural gas for a few years can plant the seeds for additional demand growth,” Dart explained, indicating the long-term implications of an abundance of natural gas for the global market.

As Europe navigates this shifting landscape, the balance between securing enough LNG for the coming winter and avoiding over-supply that could reduce prices will be crucial for maintaining stability in the energy market.

By Naila Huseynova