The bank predicts global oversupply lasting until 2022, or even as long as 2027 if the US, Russia and Qatar push forward with more new projects and fight it out for market share, ignoring economic drivers.
The rise of renewables and outperformance by production plants could extend the glut even further, it said in a bleak assessment that drove a downgrade on Santos and a negative call on Woodside Petroleum.
Macquarie cast doubt on Woodside's circa $US23 billion ($30 billion) Browse LNG project making the grade on costs, and said the producer would face price cuts as sales contracts came up for renegotiation in the next few years.
It envisages "difficult" negotiations between Woodside and its Pluto LNG customers, Tokyo Gas and Kansai Electric.
"With the commencement of ~40Mtpa of new volumes by 2019 from the US alone, we do not see Woodside having much leverage in the negotiations," Macquarie said.
Woodside would not comment on Pluto but a spokeswoman pointed to the robust demand for LNG this year, which has driven up spot prices.
"The strength of global LNG demand growth has surprised in 2017, and that could happen again in 2018," she said.
"That indicates that both LNG suppliers and LNG buyers are going to have to get to work to underpin new LNG supply projects, perhaps sooner than some expected."
Escalating imports by China in recent months, plus growth from emerging users such as Pakistan, have averted a forecast oversupply this year despite surging supply from Australia.
But next year will see further production increases, with the ramp-up of Chevron's Wheatstone and Gorgon projects in Western Australia, and the start-up of Ichthys LNG in Darwin as well as several ventures in the US Lower 48 states.
Giant LNG player Shell, the world's biggest non-government LNG supplier, said last week it expects a 50 per cent growth in production capacity between 2015-2020, with only half that in operation so far. It is still predicting a shortage will re-emerge in the 2020s given a drought in new project approvals.
Singapore-based Data Fusion meanwhile rejects the glut scenario outright, forecasting only a "negligible" amount of oversupply will hit the global market in 2019, of about 5 million tonnes.
'Last gasps of the glut scenario'
Data Fusion's Tony Regan said that new plants would be much slower to start up than most forecasters are predicting, while the strength of the recovery in demand just isn't being appreciated.
Mr Regan said from Singapore:"2017 may have seen the last gasps of the glut scenario.
"Expect it to be turned on its head in 2018 with analysts then focusing on the size of the post-2020 deficit. We see a deficit of 20 million tonnes in 2021 rising to 100 million tonnes in 2025."
Peter Cleary, an independent LNG consultant and former vice-president LNG at Santos, said that 2018 and 2019 have long been predicted to be "supply-long" years, which will inevitably affect spot prices.
But he said softer prices would encourage countries to build gas infrastructure, support the entry of new LNG importers and help drive the switch away from dirtier fossil fuels to gas.
He also questioned Macquarie's assumption of new LNG supply being added by Russia, the US and Qatar driven by geopolitical and market share reasons, rather than by economics.
"Predicting final investment decisions is an imprecise science," Mr Cleary said. "These can easily not happen or be pushed back, leaving a supply shortage."
Still, Macquarie lowered its long-term LNG price forecast to $US7.50 per million British thermal units, sharply lower from current spot prices approaching $US10. After this coming northern winter, it said prices could fall to $US4.50-$US7.50 per MMBTU.
Woodside said it expects LNG contract prices to be supported by oil prices.
"We expect the Brent oil price to range between the low $US50s a barrel and the low $US60s a barrel in 2018," the spokeswoman said.
"There are downside risks of course, but the balance of risks has shifted more to the upside for oil price. Either way, we're well positioned, having driven our break-even cash cost of sales down to $US8.5 per barrel of oil equivalent in 2016."
Macquarie is, however, positive on the prospects for extending the life of ConocoPhillips's Darwin LNG project, where Santos is a partner, and on expansion in Papua New Guinea, warranting an upgrade on Oil Search to "outperform".