U.S. elections pose bearish risk to global LNG markets
The upcoming U.S. election could pose a bearish risk to global natural gas markets, specifically liquefied natural gas (LNG), despite the anticipated limited near-term impact on domestic markets, Goldman Sachs said on Tuesday.
"Any significant changes to U.S. sanctions or tariff policies would potentially soften LNG and thus European and Asian gas markets at the margin," the bank said in a note.
A bearish LNG price skew is expected due to a potential increase in Russia's supply and a decrease in China demand, the U.S. investment bank noted.
The bank's base case for Russian gas supplies assumes zero pipeline flows through Ukraine from the end of this year and very limited LNG exports from new Russian facilities due to current U.S. sanctions.
Policy risks to China's LNG demand next year could be two-sided. In a scenario of no incremental U.S. tariffs on Chinese goods, the recent wave of China stimulus sets the stage for stronger domestic natural gas demand, Goldman said.
However, if Republican Donald Trump wins the presidential election, the risk of incremental tariffs on U.S. imports of Chinese goods means a direct risk to China's manufacturing sector and could impact China LNG imports, it added.
"From a U.S. gas supply perspective, production decisions have been primarily driven by market conditions, rather than the current regulatory environment," the bank said.
It anticipates increased U.S. gas demand as new LNG export terminals are established over the next 12–18 months, which would tighten the market and incentivize renewed capital expenditure growth from U.S. gas producers.
Further, Goldman Sachs suggests that although global LNG market changes will not directly affect U.S. gas markets in 2025, they could from 2026 due to expected Qatari LNG export growth. This could limit U.S. LNG export arbitrage and possibly lead to U.S. export cancellations for market balance.
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