IEA warns Iran war threatens record annual drop in global LNG supply

The International Energy Agency (IEA) warned that global liquefied natural gas output was on course for its largest annual decline on record as the Iran war restricts supplies and intensifies competition among importers.^[1]

Liquefied natural gas, or LNG, is natural gas cooled into liquid for transport by ship, allowing buyers to obtain fuel from suppliers beyond their pipeline networks. The annual decline remains an outlook; the supplied report gives no estimate of its size.^[1]

With less supply available, importers needing replacement fuel must compete for fewer cargoes. That can push up prices for new purchases and give suppliers with available, uninterrupted output more bargaining power.^[1]

The cost pressure then reaches businesses that burn gas to generate electricity or make products. If they cannot recover higher fuel costs through electricity tariffs or product prices, their margins narrow; the impact depends on how long the disruption lasts and how much of their purchasing price is already fixed by contract.^[1]

Impact

• LNG producers and exportersOpportunity

  Suppliers with unaffected output and volumes available to sell at new prices could earn more from importers seeking replacement supplies. Producers hit by disruptions may lose sales volumes, while fixed-price contracts limit the upside from higher prices.^[1]

• Gas-dependent power producers and manufacturersRisk

  Businesses buying replacement LNG may face higher fuel bills. Those unable to adjust selling prices promptly face margin pressure; fixed-price supply contracts or the ability to pass costs to customers offer near-term protection.^[1]