Interview, Podcast
Natural Gas in Focus: Iran Conflict Could Have ‘Very Painful’ Consequences
- Natural gas market shocks from the Iran conflict could exceed the impact of oil shocks if supply and spare capacity remain constrained.
- Inventories affected by current disruptions must be fully offset by the end of October, contingent on supply availability.
- Qatari supply capacity is not expected to return to normal levels for many years, even if Strait of Hormuz flows are restored.
- Natural gas prices have already risen by 50% to 70%, though levels remain insufficient to trigger significant industrial shutdowns in Asia compared to coal costs.
- If the conflict resolves imminently while prices stay above coal, levels could drop by 20% from current values.
- A conflict lasting longer than a few weeks would significantly hinder storage capacity rebuilding and increase market balancing pain.
- Should the conflict persist and overwhelm current demand destruction in China, prices may rise an additional 50% to 100% from current levels.
- Current price signals are arguably inadequate to drive sufficient demand destruction to secure storage reserves before winter.
- Prolonged conflict duration risks necessitating very high prices to balance inventories through the heating season.