How US LNG exporters are profiting from Iran conflict and what it means for India

Surging global LNG prices amid Iran conflict: US suppliers benefit, India braces (File image)

LNG prices in Europe surged over 40% in a week following the US-backed Israel-Iran conflict, as tensions disrupted supplies from LNG powerhouse Qatar. European and Asian markets reacted sharply, with US liquefied natural gas exporters reportedly rushing to take advantage of the situation, according to a Financial Times report.

The Dutch TTF natural gas contract, Europe’s benchmark, jumped nearly 45% to over €46. This European benchmark gas futures recorded the largest weekly gain in nearly four years after QatarEnergy confirmed on Monday that output had been suspended, according to Bloomberg.

US LNG producers race to fill supply gap

Venture Global and Cheniere Energy, two of the largest US producers, are seeking to squeeze additional LNG volumes from facilities in Texas and Louisiana and bring more capacity online as consumers from the UK to Japan brace for supply shortages.

Traders and buyers of US LNG, once described by the Trump administration as “freedom molecules,” are also rerouting cargoes to capitalize on skyrocketing prices as customers battle for supplies. The surge comes after Qatar shut down production at the world’s largest export facility following an Iranian drone attack.

LNG price details

• European natural gas prices settled 39% higher at €44.51 per megawatt-hour, the highest in about a year.
• UK natural gas prices settled up 45% at 113.79 pence per therm.
• In contrast, US natural gas prices settled up just 3.5% at $2.96 per million British thermal units.

The US surpassed Qatar and Australia as the world’s largest LNG exporter in 2023, shipping over 100 million metric tonnes overseas. Several new plants are under construction but will take months or years to start operations.

Golden Pass, a massive facility on the Gulf Coast in Texas backed by ExxonMobil and QatarEnergy, is expected to begin producing LNG within weeks, but it will take months to reach full capacity.

Can the US meet global LNG demand?

Analysts warn that US producers cannot fully compensate for a prolonged shortfall in Middle Eastern supplies.

“Nothing can make up for the loss of Qatari LNG,” said Saul Kavonic, head of energy research at MST Marquee. “If the shutdown is prolonged, or worse the LNG infrastructure is damaged, it portends a larger gas market shock than in 2022 when Russia turned off pipeline gas to Europe. Gas prices could retest their record highs set in 2022.”

Scott Shelton, energy specialist at TP ICAP, said: “Whatever we can put on a boat we are going to send. But even if prices go up 100 per cent from here, we are still limited.”

Venture Global sells just over 30% of its LNG cargoes at spot prices, compared with less than 10% for Cheniere, explaining the larger rally in its share price. Analysts also noted that traders with free-on-board cargoes could profit significantly.

“The commodity traders with US supply, the trading arms of Cheniere and Venture Global and anyone who has purchased US LNG and can trade those cargoes on international markets will benefit,” said Alex Munton, analyst at Rapidan Energy Group. “They can now sell on those cargos at 50 per cent higher prices.”

How India will be impacted

Government officials indicate that India currently has sufficient buffer stocks to manage short-term disruptions. Strategic reserves can support LPG and LNG demand for about 15 days, while crude oil reserves are estimated to last up to 45 days in the event of supply disturbances, according to Business Today.

Higher LNG costs affect industrial input prices, from fertiliser feedstock to gas for power and city networks, potentially leading to higher domestic energy tariffs or subsidy burdens. Around 60% of India’s LNG imports, mainly from Qatar and the UAE, transit through the Strait of Hormuz.

Analysts told News18 that every $1 increase in crude oil prices raises India’s annual import bill by about $2 billion, underscoring the potential economic impact of sustained volatility.

This preparedness comes as global concerns mount over the Strait of Hormuz, a key maritime chokepoint through which a significant portion of India’s crude oil and LNG imports transit.

What caused the surge?

The crisis was sparked when an Iranian drone attack forced QatarEnergy’s Ras Laffan LNG plant to shut down. The facility produces about a fifth of global LNG supplies. The company has not provided an update on the damage or when production can resume.

Additionally, LNG from Qatar and the UAE flows to global markets through the Strait of Hormuz, which Tehran threatened to close in response to the US-Israeli conflict.