Asian demand for is set to decline for a second consecutive year as
the US-Israeli war on Iran curtails supplies from the Gulf,
tightening market availability and lifting prices to multi-year
highs that slash consumption.
Analysts estimate Asian LNG demand to fall 3-10 per cent from 2025
levels, with Northeast Asia bearing most of the demand
destruction, before rebounding again in 2027.
“A lot of that demand destruction has been absorbed by
Northeast Asia … they have coal, they have some nuclear
availability. Depending on the country’s power mix, they were
able to bring down their LNG demand,” said Rystad Energy analyst
Lu Ming Pang.
Average temperatures in several months this year were also
lower than last year, reducing the need for power generation, he
said, noting that power demand and generation in South Korea and
Japan were both down year-on-year.
In Northeast Asia, China accounts for a key portion of the
demand decline, seen falling by 6.1 million tons year-on-year as
high prices weigh on industrial gas consumption, according to
Kpler.
Energy-intensive sectors such as ceramics, methanol and
glass have had to cut output or shut plants because fuel costs
have become uneconomical, while rapid inventory drawdowns,
growing domestic gas output and higher pipeline imports have
further reduced China’s need for LNG imports, analyst Nelson
Xiong said.
“Under current high prices, discretionary stocking is also
going to be delayed for Chinese buyers. We think the major
discretionary stocking is going to come in late December or Q1
2027 onwards,” he added.
Asia’s LNG demand, which already fell in 2025, was expected
to recover by 4-7 per cent this year on lower prices fuelled by rising
U.S. and Qatari supplies.
But the conflict that began on February 28 disrupted Gulf
supplies, forcing top exporter QatarEnergy to declare force
majeure and suspend exports after Iranian attacks knocked out
17 per cent of its LNG export capacity.
Asia spot LNG prices <LNG-AS> have since more than doubled
to $26 per million British thermal units (mmBtu), their highest
since December 2022.
Despite high prices and constrained supply, India and
Bangladesh continued to actively secure spot cargoes,
demonstrating resilient demand, said LSEG analyst Shruti Shah.
“In India, LNG demand is expected to remain predominantly
supported by the city gas distribution and fertilizer sectors,
which collectively account for approximately 70 per cent of the
country’s total LNG imports,” she said, while baseload power
generation requirements will underpin Bangladesh’s spot LNG
procurement activity.
High prices in 2027
Based on assumptions that QatarEnergy can resume exports
through the Strait of Hormuz and ramp up production by Q1 2027,
excluding capacity lost from damage to two liquefaction trains,
Rystad Energy and Kpler see Asian LNG demand rebounding to
around 280 million tonnes next year.
Prices, however, are expected to remain well above
pre-conflict levels. Kpler forecasts Asian spot LNG prices to
average $19.30/mmBtu this year and $14.90/mmBtu in 2027, while
Rystad Energy sees average prices above $19/mmBtu in 2026 and
around $17/mmBtu next year.
Wood Mackenzie expects prices to remain elevated even if
shipments through the Strait of Hormuz resumes by year-end,
driven by Europe’s need to replenish depleted gas inventories
ahead of the following winter.
“A lot of the upside next year will come from Europe’s
requirement to get gas into storage,” said Massimo Di Odoardo,
vice president of gas and LNG research, adding that he expects
LNG prices to remain at $15-20/mmBtu in 2027 and above $20/mmBtu
if the Strait of Hormuz stays closed.