The LNG Market in 2025-2026

Introduction

The LNG market entered 2025-2026 braced for a supply glut. A record wave of liquefaction capacity from the United States, Qatar and Africa was expected to end four years of tightness that followed Russia's invasion of Ukraine, and the IEA's forecasts had 2026 LNG supply growing about 7%, the fastest since 2019. Events reversed the call. The Strait of Hormuz crisis cut off almost a fifth of global LNG supply from the start of March 2026, Iranian missiles damaged Qatar's Ras Laffan complex, and the market spent the period short of gas rather than long. US plants ramped to record exports and filled part of the gap. For energy investment bankers, a cautious pre-FID story became a contracting race, with deal flow across liquefaction project finance, upstream gas supply, midstream pipeline and processing expansions and cross-border offtake advisory.

US LNG exports set records through the period. They averaged 15.1 Bcf/d in 2025, and the EIA's October 2026 Short-Term Energy Outlook forecasts 17.6 Bcf/d for 2026 and 18.6 Bcf/d for 2027. Three projects carry most of that growth:

Liquefaction Capacity (mtpa and Bcf/d)

LNG facility capacity is measured in millions of tons per annum (mtpa) of liquefied natural gas or in billions of cubic feet per day (Bcf/d) of gas. One mtpa of LNG corresponds to roughly 0.13 Bcf/d, so Golden Pass's 2.0 Bcf/d of nominal capacity equals about 15-16 mtpa, rising toward 18 mtpa at peak output. A large-scale LNG train typically has 4-6 mtpa of capacity and needs dedicated pipeline infrastructure to deliver its feed gas.

The glut thesis rested on simple arithmetic. New US trains, Qatar's North Field Expansion (planned to lift Qatari capacity from about 77 mtpa toward 142 mtpa by 2030) and projects in Africa and Canada were set to add supply faster than demand could absorb it. Multiple forecasters expected Asian spot prices (JKM) and European prices (TTF) to drift lower through 2027, narrowing the margin between US production costs and international sales prices.

The war removed the Gulf from that equation. The Hormuz closure affected more than 10 Bcf/d of LNG, about 20% of global supply, mostly from Ras Laffan. Missile strikes on March 18-19 then damaged two of Qatar's 14 LNG trains and a gas-to-liquids plant: QatarEnergy chief executive Saad al-Kaabi said the damage sidelines about 12.8 mtpa, or 17% of Qatar's export capacity, for three to five years. QatarEnergy declared force majeure in early March and kept extending it; in late September it pushed cancellations into November for buyers in Pakistan and Bangladesh and into early December for Italy's Edison. Qatar's September exports of 1.6 million tons were its highest since the war began yet less than a quarter of the pre-war monthly average, according to Kpler ship-tracking data.

Force Majeure (LNG Contracts)

A contract clause that excuses a seller or buyer from delivery or take-or-pay obligations when an event beyond its control, such as war, a blockade or plant damage, makes performance impossible. In LNG supply agreements a force majeure notice suspends specific cargoes for a stated period, and the counterparty must replace the lost volumes in the spot market, usually at higher prices.

The IEA's revisions show how far the market moved. Its third-quarter 2026 Gas Market Report now has 2026 LNG supply roughly flat year on year, with combined Qatari and UAE supply down about 45% and new projects in North America, Africa and Australia adding close to 50 bcm to offset most of the loss. It puts cumulative supply losses at about 140 bcm over 2026-2030, delaying the LNG supply wave and keeping markets tighter than expected through 2027. TTF averaged near $16 per MMBtu and JKM $17.5 in the second quarter, the highest second-quarter levels since 2022. Asian buyers, who took more than 80% of Qatari gas, competed with Europe for Atlantic cargoes while Europe tried to refill storage before winter.

The supply shock split US and international gas prices. By late April, EIA data showed TTF up 35% and JKM up 51% since the strait closed, while Henry Hub had fallen 9%: US terminals were already running near capacity and could not ship much more gas, so the shortage stayed overseas. With the EIA expecting Henry Hub to average about $3.48 per MMBtu in 2026, the Henry Hub-to-international spread sits far above the cost of a US cargo (115% of Henry Hub, plus a $2.25-3.50 liquefaction fee and shipping). That widening lifts the netback on every flexible US cargo and feeds directly into the 2025-2026 commodity price environment.

Buyers drew the same conclusion. Single-source risk became the central concern for importers that had relied on Gulf supply, and US developers converted that concern into signed contracts. The IEA counts three US final investment decisions since March: Venture Global's CP2 Phase 2, Delfin's first floating LNG vessel and Caturus's Commonwealth LNG.

LNG expansion generates advisory and capital markets revenue at every stage of the value chain, making it one of the most mandate-rich themes in energy banking: