Global Commodities: Dancing in the Dark

Otar Dgebuadze (0:03)

Hello, and welcome to At Any Rate. I'm your host, Otar Dgebuadze, and I lead international natural gas research here at JPMorgan.

Oil prices continue to trade in a $10 range and moved higher over this week, oscillating on reports between improved flows from the Middle East on one side and potential military escalations on the other. However, while oil is flowing, problems remain farther downstream in the end in specialized products, namely in oil products, shipping, and also in liquefied natural gas. In gas markets and LNG markets, Hormuz situation around Hormuz and Qatar exports remain at the forefront of the market developments. We saw a very active two weeks, as of beginning of this week, when we estimated the 10 plus exits from LNG vessels through straight-up Hormuz. These equates on our estimates almost 30 percent utilization rate based on the Hormuz exits. This is wartime high, and an important assumption here is that this is a signal-based metric, so-called AI signal, which vessels usually send to the satellites and which helps the global maritime industry to maintain its safety, operational readiness, et cetera, et cetera. However, since the beginning of the war, more and more vessels choose to operate in so-called dark mode or without sending such signals because of security concerns mainly and because of hiding these vessels from the satellites.

What we are trying to do is we take a snapshot of global LNG fleet daily, and then we see which of these vessels are inside the Gulf, and then we compare next day which of these vessels might have left the Gulf and which might have actually entered the Gulf. The important assumption here is that we need to get these signals that vessel projects inside the Gulf and then they outside the Gulf. If they traverse all these waters without sending any signal, then it's becoming hard for us to find these vessels without having an actual satellite imagery where we can track it vessel by vessel. We track capacity utilizations both on loading, based on loading and the Hormuz exits. And while the utilization based on exits increased to 30% plus, the utilization based on loading dropped to about 5% over last week, which is driven by the lack of available empty vessels inside the Arabian Gulf, and which lacks the capacity to load more cargoes. Going forward, we expect that there will be variation in these weekly utilization numbers. Some weeks it will be higher, then they will run out of empty vessels, which will need to be organized. But on average, on a normalized basis, we expect something like 20% probably is a right number to model Qatar utilization going forward, absent of a major resolution of the wider situation.

Meanwhile, on the ground in European gas market, we saw unusually warm September, which almost eliminated the heating demand in the region. With the heating degree days, about 90 days, it's almost half of what we observed, similar period last year. Especially the last week of September was unusually warm, when we observed almost 100 million cubic meters per day of lower gas demand due to the lower heating needs. However, despite the increased flows in through Hormuz and despite these loose fundamentals on the European grounds, we see prices moving higher and these trading above 80 euro per megawatt hour for the front month contract at the time of recording. We think that this is partially following the oil moves as Brent is firmly above $100 right now and we also had an attack on LNG tanker in the straight earlier this week, which added to the uncertainties of Qatar supply, especially as European and especially German storage levels are tracking near all time lows.

Going forward, throughout the winter, we think that there is a significant risk and risk premium embedded in winter period and we expect prices to be volatile, but average near 75 euros per megawatt hour before moving lower from late winter and into 2027 We are particularly bullish on 2027 prices, driven by rising global LNG supply. We see global LNG supply growing year over year in 2027, even with Qatar remaining largely absent from the market, which is a stress scenario and not our base case. We see even more supply of about 200 BCM in 2028 and 2029, half of which will come from the United States, which we think is highly reliable supply source, and which this development, we think, will move the market focus to the pre-war narrative, where the future LNG supply or expectations about the LNG supply rather than current storage levels are the main drivers of the price formation.

Thank you for tuning in to the Commodities Edition of JP. Morgan's At Any Rate podcast. We look forward to continuing the conversation next week. This communication is provided for information purposes only. Please refer to JP. Morgan research reports related to its content for more information, including important disclosures. 2026, JP. Morgan Chase & Co. All rights reserved. This episode was recorded on October 9, 2026