The landscape has shifted dramatically! The Middle East's influence over LNG is waning, and long-term contract prices continue to decline.

As the geopolitical conflict between the US and Iran continues to escalate, the global energy market is experiencing severe fluctuations, with international oil prices once again standing firm at $100/barrel, and the security risks for energy exports from the Middle East have risen comprehensively. Affected by restricted navigation through the Strait and attacks on regional energy facilities, the market dominance of traditional LNG export powerhouses like Qatar and the UAE has significantly declined after years of stability. European importers are taking the opportunity to bargain aggressively, forcing down long-term contract prices for Middle Eastern LNG and relaxing contract terms, ushering in a structural reshaping of the global natural gas trade landscape.

Surging geopolitical risks, significant decline in reliability of Middle Eastern LNG supply

For a long time, Qatar and the UAE have occupied a core position in global LNG trade, wielding immense pricing power thanks to their stable production capacity, ample supply sources, and mature export channels, with Qatar's LNG trade share accounting for about one-fifth of the global total.

The current situation has completely overturned the existing pattern: On one hand, the conflict disrupts shipping safety in the Strait of Hormuz, hindering Middle Eastern LNG export channels; on the other hand, Iran has launched strikes on surrounding energy production facilities, causing a substantial contraction in regional production capacity, with the recovery cycle potentially lasting for several years. The superposition of multiple risks has invalidated the traditional label of Middle Eastern gas sources as "stable and reliable," leading to a sharp rise in risk aversion among overseas buyers.

Affected by the situation, QatarEnergy has again extended its force majeure declaration to mid-October, while continuing to charter LNG vessels externally, indicating that regional LNG supply interruptions will persist over the long term. Since as early as April this year, Qatar's gas delivery to multiple countries has seen delays, with supply stability significantly weakened.

European buyers actively bargain, long-term prices and terms see comprehensive loosening

As supply risks rise, market initiative is shifting to the import side. European LNG buyers generally believe that geopolitical risks in the Gulf region have increased hidden costs such as shipping insurance and ocean freight, making the traditional high-price, rigid long-term contract model no longer suitable for the current market.

At this stage, European importers explicitly propose two core demands: price reductions and enhanced contract flexibility in newly signed long-term contracts to hedge against additional costs brought by geopolitical risks. Nicola Monti, CEO of Edison, a renowned Italian utility and LNG procurement company, admitted that newly signed LNG contracts in the Gulf region must factor in potentially soaring insurance costs, driving up the comprehensive procurement cost significantly.

It is understood that Edison has a long-term gas supply agreement with QatarEnergy, purchasing 6.4 billion cubic meters of natural gas annually, which can meet about 10% of Italy's gas demand. Affected by force majeure, delivery of this transaction has been continuously delayed from April to early September, with risks of further delays remaining.

Market prices have already reflected the shift in bargaining power: Before the US-Iran conflict, long-term contract pricing for Qatari and UAE LNG was generally anchored at 12.6%—12.7% of Brent crude oil prices; the proportion for newly signed contracts since February has fallen back to 12.3%, indicating a clear trend of price reduction.

Intensified multi-party competition further pressures Middle Eastern gas prices down

Besides geopolitical risks, the expansion of global LNG supply is further squeezing the bargaining space of the Middle East. The continuous release of LNG production capacity and steady growth in export scale from countries like the US, Canada, and Mozambique have formed a diversified global gas source landscape, breaking the previous Middle Eastern monopoly advantage.

Traders indicate that future Gulf LNG negotiations will focus on three core directions: lowering prices and improving quality, ensuring secure supply, and diversifying risk hedging. Importers will no longer rely solely on Middle Eastern gas sources, and their bargaining power will continue to strengthen.

Cost advantages remain, long-term competitiveness of Middle Eastern LNG is solid

Despite a periodic decline in pricing power, Middle Eastern gas sources like Qatar still possess irreplaceable cost advantages. Industry analysts estimate that Qatar's LNG production cost is as low as $0.50/million British thermal units, while the cost of most similar projects globally is generally between 3—5 $/million British thermal units.

Relying on ultra-large reserve resources and a low-cost labor system, the underlying cost barrier of Middle Eastern LNG remains solid. The short-term decline in bargaining power is a periodic adjustment under geopolitical disturbance, and it will remain a core supply force in the global energy trade in the long run.