LNG Buyers Demand Price Cuts Amid US-Iran War Uncertainty

Liquefied natural gas (LNG) buyers from Asia and Europe are seeking price cuts and additional supply guarantees from Qatar and the United Arab Emirates due to the US-Iran war, which has increased insurance costs on LNG deliveries. The war has disrupted most oil and gas flows through the Strait of Hormuz, reducing the negotiating power of Persian Gulf producers.

The Qatari Ras Laffan LNG terminal is one of the largest in the world, and Qatar's low production costs have made its LNG competitively priced at 12.6-12.7% of the Brent crude price. However, with rising insurance costs, buyers are seeking to drive down prices even further.

Edison's CEO Nicola Monti noted that 'Anyone entering into new contracts in the gulf region will also have to take into account potential insurance costs, which are set to increase.' Long-term LNG contracts from Qatar and the UAE were typically priced at 12.6-12.7% of the Brent crude price before the Iran war, but some deals signed since have been concluded closer to 12.3%, suggesting buyers were already seeking to factor in higher regional risk.