Key Takeaways
- Geopolitical events highlight the importance of energy security and diversified suppliers. The damage to energy infrastructure in the Middle East, particularly in Qatar, will have longer implications for liquefied natural gas (LNG) markets.
- The supply disruptions generally make the U.S. and Canada more attractive partners for energy importers.
- The outlook for U.S. energy production in 2027 has improved with the stronger commodity price backdrop.
As oil looks poised to notch its largest monthly gain ever amid the war in Iran, energy stocks have been the main bright spot in a tough tape, leading all other sectors by a landslide. To be fair, the energy benchmark was already up 25% before the war began and oil prices skyrocketed. Year-to-date through March 27, energy is up just over 40% on a total-return basis, while the S&P 500 is down 6.7% for the period. Following a month of war, it is time to revisit the implications for energy markets.
The key variables for energy discussed at the onset of the war were: 1) how long the Strait of Hormuz would be closed; and 2) how much damage would be done to energy infrastructure in the region. The outcomes for both have likely been worse than initially feared. This note discusses some of the key developments in liquefied natural gas (LNG), oil, and liquefied petroleum gas (LPG) markets in recent weeks, as well as the medium-term implications of the war for North American midstream.
Liquefied Natural Gas: Qatari Exports Possibly Hampered for 3–5 Years
While the closure of the Strait of Hormuz has restricted LNG flows, Iranian attacks on a key export facility in Qatar are set to have longer-term impacts. According to reports, the damage will take 3–5 years to repair, keeping 12.8 million tons per annum (MTPA) or ~1.7 billion cubic feet per day (Bcf/d) offline. Qatar is the second-largest LNG exporter globally, and the damaged assets represent 17% of its capacity. For context, the U.S. exported 14.6 Bcf/d in 2025 (read more).
The disruption to LNG flows and asset damage ultimately makes North American LNG relatively more attractive for global buyers in the long run. That stands to benefit established players like Cheniere (LNG) and Venture Global (VG) that can continue to add capacity over time. Cheniere and VG each have potential expansions of over 40 MTPA and 30 MTPA, respectively, that have not yet reached final investment decision or FID (i.e., started construction). The current backdrop also provides momentum to projects trying to secure financing, finalize sales agreements, and reach FID.
VG recently announced ffive-year LNG purchase agreements with both Trafigura at 0.5 MTPA on March 2, and Vitol at 1.5 MTPA on March 23. Deals with both trading companies will start this year, with Trafigura’s starting in 2Q. VG was 69% contracted for its expected 2026 cargos as of February 25. VG also greenlit Phase 2 of its CP2 LNG facility in mid-March, closing $8.6 billion of related project financing for the 9-MTPA expansion.
Cheniere typically has over 90% of its capacity secured under long-term contracts, limiting its ability to sell spot cargos. However, at the CERAWeek energy conference in Houston last week, Cheniere’s CEO reportedly said the company’s fifth train of the Corpus Christi Stage 3 project may be operational on March 27. That train first produced LNG in February. The company is also examining its maintenance schedule to try to send more cargos.
The chart below shows European and Asian benchmark LNG prices over the last month relative to the U.S. benchmark Henry Hub, which has seen no real impact. For LNG importers, the disruptions and price spikes raise questions around energy security and reliability.
In Oil Markets, Brent Crude Sees More Severe Price Impact
While refineries and infrastructure in the region have been damaged, the impact on oil likely moderates once the Strait is reopened and fighting eases. That said, oil supplies globally are down over 10 million barrels per day (MMBpd) since the start of the war, and inventories are declining. The global, seaborne benchmark Brent crude has seen the brunt of the increase, as discussed below. Oil price curves remain extremely backwardated, with the May contract trading more than $10 per barrel above the July contract for both Brent and West Texas Intermediate (WTI) at writing. Looking further out, the curves for both have shifted higher through the end of the decade.
The politics of prices at the pump in an election year have driven an emphasis in the U.S. on lowering oil prices, but measures have been taken globally to increase supplies. Namely, the International Energy Agency announced a 400-million-barrel (MMBbl) release from emergency reserves, with the U.S. contributing 172 MMBbls. The U.S. has even temporarily lifted sanctions on Iranian and Russian oil at sea, a move that will add an estimated 140 MMBbls of Iranian oil and 124 MMBbls of Russian oil to the market, albeit volumes are difficult to ascertain.
For its part, Saudi Aramco has reportedly ramped up volumes through its East-West pipeline, which flows to Yanbu on the Red Sea. The pipeline has been reported to temporarily move up to 7 MMBpd in the past. Yanbu exports were estimated just above 4 MMBpd in mid-March, providing some relief.
Supply disruptions have had a greater impact on Brent as the global oil benchmark. As shown below, Brent was trading $13.53 per barrel above the U.S. benchmark WTI as of March 26. Even WTI at Houston, which is a better seaborne comparison, was trading more than $10 below Brent. Wide spreads between Brent and WTI were common during the early 2010s as significant growth in U.S. production put downward pressure on WTI, and barrels were constrained getting from the Cushing oil hub to markets (namely the Gulf Coast). The widened Brent-WTI spread tends to mainly benefit U.S. refiners, which can enjoy a feedstock cost advantage while still selling refined products that tend to be more reflective of global oil prices.
Liquefied Petroleum Gas (LPG) Also Impacted
In addition to being a major LNG exporter, Qatar is also known for its exports of condensate, which could be described as very light crude, and liquefied petroleum gas (LPG), which includes propane and butane. Attacks on infrastructure are expected to curb Qatar’s exports of condensate by a fourth and LPG exports by 13%. The U.S. is a major producer and exporter of condensate and LPG. Similar to LNG, global buyers may be more interested in inking long-term contracts with U.S. suppliers. Within U.S. midstream, Energy Transfer (ET), Enterprise Products Partners (EPD), and Targa Resources (TRGP) currently operate LPG export capacity, while MPLX (MPLX) and ONEOK (OKE) are partnering on an LPG export terminal set to come online in 2028.
Additional Energy Implications
Coming into the year, the consensus was cautious on oil prices due to oversupply concerns. This also led to some worries around U.S. production trends and the impact to midstream. The outlook has quickly reversed. In its March Short-Term Energy Outlook, the U.S. Energy Information Administration raised its production forecasts for 2027 for oil, natural gas, and NGLs. The 2027 oil forecast was increased by 0.5 MMBpd to 13.83 MMBpd, which would be a new record. While a focus on capital discipline likely keeps production growth moderate, fears of oil production flatlining or falling have been eased with higher prices.
Looking more broadly, the U.S. and Canada are likely to be even more attractive partners for energy importers going forward, particularly for LNG and LPG. The proximity of Canada’s west coast export infrastructure to Asian markets is a key advantage, albeit Canadian export capacity is limited (read more).
Similar to the aftereffects of the Russian invasion of Ukraine in 2022, energy security, reliability, and affordability are likely to remain topical. Countries with diversified energy suppliers and a mix of energy sources are better positioned to weather energy market disruptions. A more robust power mix includes natural gas, renewables, coal, and nuclear.
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Related Research:
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