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- Goldman Sachs is warning of a painful gas squeeze as much of Qatar's supply remains offline.
- Qatar's liquefied natural gas infrastructure is severely damaged.
- Natural gas prices are already surging, and further increases could follow if supply remains tight.
While the war in Iran has oil markets on edge, a natural gas crisis may be brewing, warned a top Goldman Sachs analyst.
The concern centers on Qatar, which supplies about one-fifth of the world's global liquefied natural gas. Production at QatarEnergy's Ras Laffan Industrial City — the world's largest LNG facility — was knocked offline by recent attacks.
"There is a risk that this just drags so much that it makes the process very painful," said Samantha Dart, the co-head of global commodities research at Goldman Sachs, on the bank's "Exchanges" podcast.
Natural gas is vital to the global economy, used for electricity generation, industrial processes, and heating.
But unlike oil, gas markets are highly seasonal. Countries rely on building up inventories between April and October to get through peak winter demand.
That means that disruptions hitting now — months ahead of winter in the northern hemisphere — can force prices sharply higher if supply isn't restored in time.
"Whatever impact that has had on inventories today, we have to offset it completely by the end of October," Dart said in the podcast recorded on Monday, before the announcement of a two-week ceasefire between the US and Iran.
The supply shock is significant. Qatar's LNG infrastructure has been hit hard, and QatarEnergy has said that repairs may take three to five years to fully restore capacity.
"It doesn't take three years to fix anything. What they are really saying is these two liquefaction trains were so damaged that we need to start over. We need to rebuild them from scratch," Dart said.
Natural gas prices have already climbed by 50% to 70%, but Dart said she had expected prices to rally further.
So far, higher prices have only encouraged limited switching to alternatives like coal, rather than the deeper demand cuts needed to rebalance the market, she said.
However, prices haven't surged as dramatically as expected because China, after a mild winter, has redirected its surplus gas into global markets, providing some short-term relief, especially in Europe.
As that temporary relief fades, the market will be forced to reckon with the underlying constraints. The global system lacks slack, and the US — the world's largest LNG exporter — has no spare capacity to fill the gap quickly, Dart said.
If the conflict is resolved soon, prices could ease.
But if it drags on, Goldman sees potential for gas prices to climb another 50% to 100% from current levels as markets are forced to ration demand more aggressively, she added.