Liquefied petroleum gas in Germany and Europe: origin, supply volumes, prices

The past three months on the LNG market have been characterised by geopolitical risks and several waves of escalation in the Middle East. The focus has been on the extent to which supplies via the Strait of Hormuz are at risk and what role LNG from the US will play in future.

European gas prices (TTF) initially reacted sharply to the tensions in the Middle East. The threat to LNG exports from Qatar, as well as the uncertainty surrounding the Strait of Hormuz, led to a noticeable risk premium. In addition, there were significant capacity losses: Following severe air and drone attacks on the Ras Laffan industrial complex, the state-owned company QatarEnergy was forced to temporarily halt production. Around 17 per cent of Qatar’s export capacity was permanently lost. Due to the damage caused to the highly complex liquefaction plants, the company estimates that it will take three to five years to repair a destroyed production line.^[1]

During this period, European gas prices rose to record highs before stabilising again over the course of the summer. This was due to the partial resumption of LNG supplies from the Gulf region, high Norwegian gas exports and additional LNG volumes from the US. Low gas consumption in the summer also meant that the tense situation on the gas market receded somewhat into the background. The low gas storage levels did not yet play a major role.

The growing role of LNG from the US

In recent months, the US has further consolidated its position as the key driver of growth in global LNG supply. Utilisation rates at US liquefaction plants remain high, and new capacity is being added gradually. According to the latest European market analyses, around 59 per cent of the EU’s LNG imports now come from the US.^[2] Some studies predict that, over the course of 2026, around two-thirds of all European LNG imports could come from the United States.^[3] Whilst this does strengthen security of supply vis-à-vis the Middle East, it simultaneously increases Europe’s dependence on US LNG.

Increased coal-fired power generation due to high gas prices

Gas prices in Europe are currently so high that LNG tankers are not heading for the competing Asian market (JKM) but are instead sailing to European LNG terminals. TTF spot and monthly gas prices reached record highs of over 69 euros/MWh. This price level has led to an increase in coal-fired power generation, as coal-fired power stations have moved ahead of gas-fired power stations in the merit order.

Lower gas prices are not currently on the cards

There are many indications that supply will be sufficient in the coming months; however, the Persian Gulf region remains a significant risk factor. Delivery delays, higher freight costs, uncertainty amongst insurers and shipping companies, and low storage levels will keep prices high and limit any downward corrections. Added to this are increased hedging activities resulting from postponed gas purchases, as market participants had still been hoping for a resolution to the conflict between the US and Iran in the spring and summer of 2026. These purchases now need to be made up for and are supporting the gas market.

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^[1] https://www.qatarenergy.qa/en/MediaCenter/Pages/newsdetails.aspx?ItemId=3897

^[2] https://www.spglobal.com/energy/en/news-research/latest-news/natural-gas/070126-eu-lng-imports-fall-18-yoy-in-june-amid-sustained-wartime-strains-cera

^[3] https://www.energie-management.consulting/us-lng-dominanz-europaeische-gasversorgung-beschaffungsstrategie/