European natural gas crisis just beginning? Morgan Stanley: Current prices only reflect 1-2 weeks of disruption; if Qatar stops production for several months, prices could double again!

European natural gas crisis just beginning? Morgan Stanley: Current prices only reflect 1-2 weeks of disruption; if Qatar stops production for several months, prices could double again!

The European natural gas market is repricing shocks from Middle Eastern geopolitics.

According to Chase the Wind Trading Desk, Morgan Stanley's latest report points out that the European natural gas benchmark TTF surged sharply, driven by news of LNG transport halts in the Strait of Hormuz and production stoppages at Qatar’s Ras Laffan, but current prices mainly reflect expected interruptions of just 1–2 weeks (base scenario). However, in extreme cases, if the shutdown at Ras Laffan extends to several months, TTF could spike to 100 euros, approaching the squeeze market seen in 2022.

The latest disturbances stem from a combination of supply and logistics disruptions. Based on Vortexa tanker tracking data, LNG flows through the Strait of Hormuz once dropped to zero, combined with news related to the shutdown of Qatar Energy’s world’s largest liquefied natural gas facility, pushing TTF to surge 60% in two days.

In its base scenario, Morgan Stanley expects the market is pricing in "Gulf LNG exports interrupted for 1–2 weeks." The firm raised its short-term forecast for TTF to about 45 euros/MWh, and believes that if Qatar production recovers quickly and the Strait gradually reopens, TTF will likely stay in the 45–50 euro/MWh range in the near term.

For Europe, Morgan Stanley believes European fundamentals are much more robust than in 2022, and Qatar LNG only accounts for a small portion of total European supply. Even if Middle Eastern disruptions persist and Europe turns to Asia for cargo, the supply-demand imbalance is far less severe than 2022.

Strait "shutdown" combined with Ras Laffan outage intensifies supply worries

Morgan Stanley's March 3 report says about 88 million tonnes (about 120 billion cubic meters/year) of LNG pass through the Strait of Hormuz annually, accounting for around 20% of global LNG supply, mainly from Qatar and the UAE. Unlike crude oil, Qatar and UAE natural gas lack alternative export routes. If the strait becomes "almost impassable" for oil tankers, supply shocks cannot be easily mitigated by rerouting.

What makes the market even more sensitive is Ras Laffan's own outage. Morgan Stanley notes that Ras Laffan possesses 14 liquefaction trains, with annual capacity of 77 million tonnes, making it the largest LNG export facility globally. Multiple media outlets reported the facility was attacked by drones, while energy research consultancy Energy Aspects suggested another possibility—shipping blockages and insufficient storage capacity forced Qatar Energy to reduce or halt production. Regardless of the cause, such large-scale outages are rare in the sector, and the pace of restarting operations becomes the core variable for pricing.

Besides Qatar, Israel also saw supply disruptions last weekend. The report notes that on February 28, Israel’s government ordered Leviathan and Karish gas fields to temporarily shut down, while Tamar appears to remain operational, leading to the suspension of exports to Egypt and Jordan. Export activity partially resumed on March 2. Morgan Stanley estimates that Egypt’s immediate disruption may be at the 200–300 million cubic meters/day range. The report further cites Platts data saying Egypt issued LNG tenders due to Israel’s pipeline gas interruption, planning to procure 20 cargoes between June and September, and adding 3 cargoes in March.

Why is TTF’s reaction more intense: tight balance, limited buffer, hard to reroute

Morgan Stanley offers four main points explaining why gas market volatility is amplified compared to crude oil.

First, fundamentals were more "tight" before the event. The report says the global LNG market was roughly balanced in recent months, with limited new winter supply and improved year-on-year demand in Europe and Asia. For Europe, strong heating and electricity demand, delayed LNG imports, and inventories at decade lows.

Second, gas supply actually dropped, not just logistics constraints. Ras Laffan and Israel’s field outages mean an obvious decrease in available supply, with higher visibility of the disruption.

Third, the system buffer is thinner and rerouting is difficult. The report highlights that LNG storage is inherently difficult, major importers have limited LNG stockpile days—for example, Japan’s reserves can only cover about 10 days of demand. Furthermore, Qatar and UAE lack alternative export routes bypassing the strait. Other main European suppliers also lack surplus: Norway and North Africa’s pipeline gas are basically at maximum capacity.

Fourth, TTF underpriced geopolitical risk before the event. Morgan Stanley estimates that on February 27, TTF only priced in a 2–3 euro/MWh geopolitical premium, implying less than 10% chance of serious disruption, while the crude market had priced in a higher likelihood. As a result, gas underwent a "catch-up" revaluation after the incident.

Scenario analysis: Base pricing 1–2 weeks, key focus on Ras Laffan restart window

Morgan Stanley believes the market is currently reflecting “Scenario 2”—interruptions lasting 1–2 weeks—as the base scenario.

  • Scenario 1 (24–48 hours): If Qatar’s production and exports resume within 48 hours, TTF could fall back to about 35 euros/MWh in 2–3 weeks. The report notes Energy Aspects believes Qatar has the capacity to resume liquefaction in 3–6 hours, so quick recovery is feasible.
  • Scenario 2 (1–2 weeks, base): The main impact of this phase is defined as an “fleet efficiency shock.” Their estimate shows if the average 18-day voyage is delayed by a week, it’s equal to a sharp reduction in fleet capacity, causing a roughly 7% effective loss in global delivery capacity, equivalent to 2.8 Mt/month. In price terms, TTF may fluctuate around 45–50 euros/MWh, JKM about $16–18/MMBtu. Since about 89% of affected cargoes originally flowed to Asia, Asian replenishing will compete more directly with Europe, pushing TTF to higher marginal pricing.

In this base scenario, Morgan Stanley estimates Europe could lose about 2.3 million tonnes of LNG supply per month (including Asian diversions and direct reductions for Europe), dragging down inventory trajectory. The report expects that if normalcy is restored by end-March, stocks can still be replenished to about 70–75% by summer, so price pressure is more concentrated at the front end of the curve. TTF may still decline in summer, but the risk premium will be harder to fully dissipate.

If Qatar’s outage “extends”: One month 60–80, multiple months may approach 2022-style squeeze

Morgan Stanley identifies tail risk as the length of Ras Laffan’s outage.

  • Scenario 3 (serious outage one month): If the Strait is shut for several weeks, compounded with supply constraints from Ras Laffan and UAE’s Das Island, global monthly LNG supply loss could reach up to 6.8 Mt. The report estimates Europe’s potential monthly supply gap could reach about 5.5 million tonnes. TTF may need to rise to 60–80 euros/MWh to trigger demand reduction and rebalance.
  • Scenario 4 (Ras Laffan shutdown for several months): The report notes that unplanned outages at large LNG facilities are not easily restored quickly, and uses the historical cases of Freeport LNG and Hammerfest LNG to illustrate repairs may take considerable time. If Ras Laffan’s damage and repair schedule is unclear, and shutdown lasts 2–3 months, European storage replenishment in summer will be severely hindered. Prices may rise further, surpassing 100 euros/MWh, and with a longer outage could reach the high zone seen in 2022. At the current level of about 45 euros/MWh, this means prices could “double,” provided the outage shifts from “weeks” to “months” or even “seasons.”

Supply-demand imbalance far less than 2022, Europe need not worry?

For Europe, Morgan Stanley’s core judgment is clear: The 2026 Middle Eastern LNG risk is similar in “scale” to the shock from the 2022 Russian gas supply cutoff, but the “transmission path” is completely different.

In 2022, Europe lost about 130 billion cubic meters/year of Russian gas, accounting for 40% of supply—a direct supply cut-off crisis. TTF quickly doubled and soared above 200 euros/MWh in summer.

This time, even if Qatar faces a long-term shutdown, the potential impact is about 120 billion cubic meters/year, similar in scale, but Europe’s direct exposure is only about 4% (as Qatar only accounts for a small fraction of European supply).

The key is: 40% of Europe’s gas comes from LNG, which is the marginal pricing source. If Middle Eastern disruptions persist and LNG turns to Asia, even if Europe has to outbid for cargo—prices may fluctuate sharply, but the supply-demand imbalance is far less than in 2022.

 

 

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