The global liquefied natural gas (LNG) market is poised for a major transformation as the largest-ever wave of new supply is about to hit, according to RBC Capital Markets. This influx, driven by new production capacity, is expected to significantly impact global markets, especially as regional gas markets have become more interconnected following the Russia-Ukraine conflict.

RBC analysts predict that the new supply will lead to an extended period of oversupply by late 2026, lasting until 2030, with prices potentially dropping below double digits. As of Wednesday, natural gas futures at the Dutch Title Transfer Facility (TTF), a key European benchmark, were trading at $12.78 per million metric British thermal units.

Throughout the year, experts have raised concerns that sluggish demand growth, combined with a surge in export capacity, could create a vastly oversupplied market. This oversupply could lead to prolonged price pressures, with companies focusing more on shipping utilization than on seeking profits through arbitrage opportunities.

Global LNG trade has doubled in the past decade, fueled in part by disruptions to Russian pipeline gas supplies to Europe. RBC forecasts that global LNG production capacity will increase by 50% by the end of the decade, with the U.S. and Qatar maintaining their dominance as top suppliers, accounting for nearly half of the market by 2030.

While Asia-Pacific remains the largest importer of LNG, with projected annual demand growth of 5%, primarily from China, India, and South Korea, the overall market has remained relatively stable despite rising geopolitical tensions.

Challenges remain for the LNG sector, including the upcoming 2024-2025 winter and the expiration of Russian gas contracts to Europe through Ukraine, which could tighten the global gas market next year and increase Europe’s reliance on LNG imports, according to the International Energy Agency.