Why LNG Forward Curves Keep Getting It Wrong: A History of Failed Predictions

The global Gas & LNG market has undergone fundamental structural changes in the past decade. Demand patterns shift faster than traditional models can track, supply chains face unprecedented disruptions, and energy security has returned as a defining priority for nations from Europe to Asia. Simultaneously, governments are implementing net-zero regulations that add another layer of complexity to an already volatile system.

In this new environment, traditional forecasting tools—particularly long-term forward curves—have repeatedly failed to predict actual market outcomes.

The Evidence: A Track Record of Missed Forecasts

2016-2019: The Overcapacity That Never Came

During 2016 and 2017, LNG markets were widely expected to enter a period of overcapacity, resulting in a long period of low LNG spot prices in Asia. Instead, Asian LNG spot prices increased quickly due to surging demand, particularly in China, and delays in bringing new LNG projects online. In 2018, fears of overcapacity began to recede as LNG prices climbed further, and discussion turned to the potential for a future supply crunch. However, by early 2019, LNG spot prices in Asia had surprised again, having fallen rapidly to record lows.

What happened: Forward curves completely reversed direction multiple times within a three-year period, unable to anticipate either China's accelerating demand or project delays.

2021: The $40/MMBtu Price Spike Nobody Saw Coming

In January 2021, Asian LNG markets experienced an extraordinary price spike. Asian buyers were caught short LNG across a prolonged cold period, with North Asian cargos trading up to $40/MMBtu—a level that no forward curve had priced in just months earlier.

Root causes the models missed:

• Extended cold weather across Northeast Asia
• China's accelerating coal-to-gas switching
• Supply tightness from maintenance delays

2022: The Ukraine War and the Greatest Pricing Dislocation in History

Following a record-breaking year in which European gas TTF front-month prices surged beyond 180 euros/MWh ($60/MMBtu) in December, 2022 proved that geopolitical shocks can obliterate forward curves overnight.

U.S. wholesale natural gas prices were particularly volatile in 2022 because of additional uncertainty caused by increased European demand for LNG following Russia's full-scale invasion of Ukraine in February and the explosion at the Freeport LNG export terminal in June.

What forward curves predicted in January 2022: The average TTF forward curve price for the balance of 2022 was priced at 89 euros/MWh at the start of the year (as of Jan. 4, 2022).

What actually happened: Prices more than doubled these forecasts, with TTF exceeding 180 euros/MWh—a forecast error of over 100%.

Energy prices rose more than 50 percent in 2022, with Brent crude oil averaging $100 a barrel and natural gas prices doubling year-over-year—moves that forward curves failed to anticipate even weeks before they occurred.

2023: The Price Collapse Models Didn't Predict

After the 2022 price spike, forward curves suggested sustained elevated pricing through 2023-2024. Instead, prices retreated from 2022 levels despite modest new LNG export capacity additions, largely due to demand destruction and weather normalization.

Asian LNG spot prices averaged $33-34/MMBtu in 2022, but by January 2023, JKM prices had fallen below $30/MMBtu and reached low-$20/MMBtu levels—a rapid 40%+ decline that caught market participants off guard.

Why Forward Curves Continue to Fail

1. Extreme Weather Volatility Has Become the Norm

Weather is now the single biggest near-term driver of gas consumption—and it has never been more unpredictable.

• Europe's 2021–2023 cold snaps created multi-billion-dollar swings in LNG demand
• Asia's heat waves triggered record spot purchases despite existing long-term contracts
• Multiple "once-in-a-decade" weather events now happen annually

Forward curves simply cannot price this level of volatility.

2. Geopolitical Shocks Reset Markets Instantly

The past five years provide irrefutable proof:

• Russia's invasion of Ukraine in 2022 sent prices to unprecedented levels, with market tightness and long-run marginal costs rising sharply
• Red Sea disruptions reshaped shipping economics
• U.S. LNG permitting uncertainty erased visibility for project developers
• Kiev's decision to block natural gas flows from Russia through Ukraine on January 1, 2025 further tightened the LNG market, with European gas prices surging more than 50% in anticipation

A single geopolitical headline can move prices more than years of assumed fundamentals.

3. Demand Elasticity That Models Underestimate

Asian LNG demand has proven highly responsive to price levels, with Q4 2024 showing a significant slowdown in LNG demand growth year-over-year as prices increased, led by China's industrial fuel switching and South Asia's demand destruction.

One unplanned event can change the global balance overnight:

• A nuclear plant outage in France or Japan
• A hydro shortage impacting generation capacity
• An industrial rebound in China
• Infrastructure bottlenecks restricting alternative fuels

4. Supply-Side Uncertainty Is Chronic

The belief that LNG supply comes online "on schedule" has been repeatedly disproven:

• Russia's Arctic LNG 2 project suspended gas liquefaction amid sanctions and lack of tankers, with operators issuing force majeure notices
• Construction delays affecting multiple U.S. projects
• EPC bottlenecks and equipment shortages
• Unplanned maintenance creating supply gaps

The result is chronic supply unpredictability—a fatal flaw for any model assuming linear growth.

5. Structural Market Changes Accelerating

Japan's annual LNG imports have fallen 20% since 2018, with demand projected to fall by one-third from 2019 levels as renewables and nuclear generation expand. South Korea's demand is also declining as the share of LNG in power generation falls.

Meanwhile, China's LNG demand growth continues to be underpinned by economic growth, coal-to-gas switching, and expanding gas networks—creating unpredictable demand swings that confound traditional forecasting.

The Bottom Line: Forward Curves React, They Don't Predict

Forward curves now merely reflect yesterday's news, processed through the lens of old assumptions, rather than predicting the future.

The documented failures:

• Forward curves in 2016-2017 missed the supply-demand reversal
• Forward curves in early 2022 underestimated prices by more than 100%
• Forward curves in late 2022 overestimated 2023 prices by 40%+
• Forward curves consistently failed to price geopolitical and weather shocks

This is not a temporary deviation. It's a structural shift.

What Smart Traders and LNG Players Do Differently

Companies that thrive in this environment recognize that:

1. Historical forward curve accuracy should inform skepticism - When pitching long-term supply deals or investment decisions, reference the actual track record of forecast accuracy
2. Scenario analysis matters more than point estimates - Build strategies around multiple possible outcomes, not single-line forecasts
3. Real-time market signals trump long-term curves - Price movements, shipping congestion, storage levels, weather patterns, and policy changes must be monitored continuously
4. Optionality and flexibility are premium - The ability to respond to actual market conditions beats locked-in assumptions
5. Risk management must account for extreme outcomes - The past five years prove that "tail risks" occur with surprising regularity

A New Approach for LNG Market Participants

The next generation of successful LNG players will:

• Stop treating forward curves as truth and start treating them as one imperfect input among many
• Build dynamic intelligence systems that incorporate real-time data on weather, geopolitics, supply disruptions, and demand shifts
• Embed probabilistic thinking into decision-making rather than relying on false precision
• Design contracts with flexibility that account for the market's demonstrated volatility
• Maintain diversified supply and offtake strategies that can adapt to rapid changes

Conclusion

Forward curves had their place—in a world that was slower, simpler, and more predictable. That world no longer exists.

The LNG market is now shaped by weather shocks, geopolitical turbulence, nonlinear demand responses, supply fragility, and structural energy transitions. In this environment, past performance of forward curves is the best predictor of future performance: they will continue to be wrong at critical moments.

The companies and traders that recognize this reality—and build strategies accordingly—will outperform those still anchored to tools designed for a market that no longer exists.