Shares of Western gas exporters reap war windfall as Qatar flows dry up

By Danilo Masoni

MILAN, March 25 (Reuters) - Shares in Western gas suppliers and traders have emerged as beneficiaries of the U.S.-Israeli war on Iran, as investors expect companies with supply routes that bypass the Middle East to reap a windfall from high energy prices.

U.S. liquefied natural gas exporter Venture Global VG.N has been a standout, with its shares surging over 70% since the conflict began, outperforming other global energy stocks, as the jump in natural gas prices has outpaced the rally in oil.

The European gas benchmark almost doubled at one point to around 68 euros per megawatt hour TRNLTTFMc1, while Asian spot prices have also risen sharply, reviving concerns over energy security just before Europe’s gas‑storage refill season.

“The gas price ramp has been the most important takeaway for markets. It suggests the underlying market dynamics are tighter than crude,” said Jefferies analyst Mike Wilson.

Brent crude LCOc1 has risen over 40% since the start of the conflict.

While Europe imports relatively little gas directly from Qatar, the world’s second‑largest LNG producer, the effective closure of the Strait of Hormuz has forced Asian buyers to compete with Europe for U.S. cargoes, pushing up global prices.

DIVERTED CARGOES AND HIGHER PRODUCTION

U.S. LNG export terminals are already operating near full capacity, analysts say, meaning additional volumes can only come from diverting existing cargoes, rather than increased output.

"If you want an extra ship of U.S. gas in Berlin, you have to bid high enough to divert it away from Tokyo," said Bernstein analyst Irene Himona.

For equity investors, the focus has been on which companies can monetise the price shock.

Analysts see Venture Global as uniquely positioned because most output from its Plaquemines facility on the U.S. Gulf coast is sold via spot tenders rather than long‑term contracts linked to U.S. gas prices, which have so far remained relatively stable.

Shares in U.S. LNG suppliers that are more reliant on contract pricing have posted smaller gains, though they still outperformed broader energy indices.

“One clear beneficiary in all of this is the U.S. LNG industry,” said Will Riley, portfolio manager on the Guinness Global Energy strategy.

Shares in LNG developer NextDecade NEXT.O and exporter Cheniere Energy LNG.N have risen 34% and 25%, respectively, compared with the MSCI Energy index's .MIWO0EN00PUS roughly 10% gain.

LNG stocks elsewhere, such as Australia’s Woodside WDS.AX, Santos STO.AX and Golar LNG GLNG.O, have also outperformed the index.

LONGER-TERM SUPPLY IMPLICATIONS

After such a rally, LNG stocks could face increased volatility. Even so, analysts are bullish, despite many of the stocks now trading above most investment banks’ price targets.

Damage to Qatar’s Ras Laffan energy complex has wiped out about 17% of the country’s capacity for up to five years, suggesting markets may take longer to return to pre‑war levels.

Beyond the near-term earnings boost expected to show up in the upcoming reporting season, analysts also point to longer‑term supply implications should Qatar delay its planned North Field East expansion.

On Monday, Morgan Stanley upgraded Venture Global and Cheniere to overweight from underweight, saying the Middle East disruption had evolved into a multi‑year supply loss that has tightened the market.

Investors have also favoured Western gas traders and suppliers to Europe.

Shares in Norway’s Equinor EQNR.OL, which supplies gas to Europe via pipeline, and producers Aker BP AKRBP.OL and Var Energi VAR.OL, have consistently outperformed broader energy indices, along with Shell SHEL.L, the world’s largest LNG trader.