Asian LNG demand set to fall for second year as war lifts prices

Asian demand for liquefied natural gas is on track to fall for a second consecutive year in 2026, as spot prices driven to multi-year highs by the loss of Qatari supply force buyers across the continent to cut back imports, according to industry analysts and shipping data published on Thursday.

Analysts estimate Asian LNG demand will decline 3 to 10 percent from 2025 levels, with Northeast Asia absorbing most of the demand destruction, before a potential rebound in 2027. Asia's September imports are expected to reach just 20.09 million metric tons, the lowest for the month since 2018 and down from 22.27 million tons a year earlier, according to data from commodity analytics firm Kpler cited by Reuters Thomson Reuters Corporation ↘ 3.79%.thehindubusinessline+1

War Disrupts Gulf Supply

The supply crunch traces directly to the conflict that began on February 28, when the U.S.-Israeli war on Iran disrupted shipping through the Strait of Hormuz. QatarEnergy declared force majeure and suspended exports after Iranian attacks knocked out 17 percent of its LNG export capacity. Prior to the war, Qatar supplied nearly 20 percent of global LNG and ranked as the world's second- or third-largest shipper.reuters+1

Qatar's shipments have since collapsed. Just 70,000 tons — a single cargo — exited the Strait of Hormuz in August, down from an average of 6.51 million tons per month in the three months before the conflict began. Asian spot LNG prices have more than doubled to $26 per million British thermal units, up 150 percent from $10.40/mmBtu in late February.reuters

China Retreats, Europe Fills the Gap

China accounts for a large share of the demand decline, with Kpler estimating a 6.1 million ton year-on-year drop as high prices weigh on industrial gas consumption. Energy-intensive sectors including ceramics, methanol, and glass have cut output or shuttered plants, analyst Nelson Xiong said. China is on track to lose its title as the world's largest LNG buyer to Japan this year.thehindubusinessline+1

The silver lining for global markets is that Asia's retreat is freeing cargoes for Europe, where natural gas inventories sit around 68 percent full — roughly 16 percentage points below the five-year average. European LNG imports are rising, with Kpler estimating October and November arrivals above 10.5 million tons each. European gas prices ticked higher on Thursday, with the Dutch TTF contract rising 0.45 percent to 78.37 euros per megawatt-hour amid low storage levels that prompted Germany to direct its state-owned gas trader to procure additional supply.reuters+1

Outlook Hinges on Strait of Hormuz

Kpler forecasts Asian spot LNG prices to average $19.30/mmBtu this year and $14.90/mmBtu in 2027, assuming QatarEnergy can resume exports through the strait and ramp up production by the first quarter of next year. But Wood Mackenzie's Massimo Di Odoardo warned that prices could remain above $20/mmBtu if the strait stays closed, with Europe's need to replenish depleted gas inventories ahead of winter 2027-28 adding further upward pressure.thehindubusinessline