In a client note on Friday the broker said the price spread between the Atlantic and Pacific basins narrowed from peak of about $15 million British thermal units to about $4/mmBtu due to the “well supplied spot market”.

“Given transportation costs, there is likely limited ability for the main LNG players to benefit from this spread,” Morgan Stanley said as a significant Asian price premium has evaporated.

“Whilst earnings from long-term contracts remain intact and linked to oil prices, shorter term trading profits are likely to be lower than in previous years.”

Weaker LNG demand is also expected to shelve LNG project especially in the US.

“These US LNG export projects represent a substantial amount of additional LNG supply capacity and, hence, add a lot of uncertainty to the long-term LNG market, both in terms of increased supply and the ability of the market to absorb it.”

Morgan Stanley also flagged the possibility that excess LNG volumes could end up in the European market and depressing those prices.

“There is a risk that LNG buyers may have over-contracted, and will need to off-load cargoes in the short-term spot market, which now looks well supplied.”

JP Morgan has flagged that Statoil is particularly at risk from an LNG glut.

“We highlight that Norwegian gas accounted for 34% of Statoil’s total production in fiscal year 2014 and we estimate that the gas business (upstream, supply and trading) contributed circa 32% of adjusted operating income,” the broker said in a recent client note.

“We believe that if LNG surpluses end up in Europe, hub price weakness will make a significant dent in Statoil’s 2015-16 earnings.”

JPM’s underweight rating on the Norwegian oil giant also reflected “weaker exploration performance” and the risks that further weakening in oil prices would have an “above average impact” on Statoil.