Liquefied natural gas prices have doubled since January as the Middle East war throttles exports from the Persian Gulf, forcing importers such as Japan and Pakistan to burn more coal instead. Qatar's shipments have slowed to a trickle after a force majeure declaration, and Gas Strategies sees global demand falling as much as 8% this year if the squeeze continues.
Liquefied natural gas prices have doubled since January, as the war in the Middle East chokes off exports from the Persian Gulf and pushes importers such as Japan and Pakistan back toward coal.
Qatar's exports slow to a trickle
The war forced a force majeure declaration at Qatar's liquefaction hub, the world's largest single LNG facility, and Gulf exports have since slowed to a trickle. Buyers are still paying steep premiums to secure cargoes during the northern hemisphere's peak season.
Gas Strategies chief executive Pat Breen told The National that buyers who paid $10 per MMBtu in January were paying $20 to $22 per MMBtu for much of July. Attacks on LNG carriers in the Strait of Hormuz suggest the chokepoint won't normalize soon, and talks between the U.S. and Iran remain confined to media reports rather than reality.
High prices are destroying demand
Gas Strategies estimates that global LNG demand could fall 8% this year from 2025 if Gulf flows stay subdued, The National reported. Japan, the world's second-largest LNG importer, and Pakistan have both leaned harder on coal rather than pay the premium. Europe, meanwhile, is falling behind on refilling its gas storage because of the high prices.
China and the EU are reshuffling the flow
China cut its LNG purchases sharply in Q2. It has been rebuilding them this quarter as electricity demand rose with the heat and domestic gas production slid, Kpler reported at the end of June.
The European Union is importing Russian LNG at record rates. That flow is set to stop once the EU's ban on Russian gas imports takes effect at the start of 2027. That could free up more LNG for buyers such as China, redirecting demand toward other major exporters, notably the United States and Australia; the U.S. is already the largest LNG exporter and is building new liquefaction capacity.
Relief is coming, just not soon
Breen suggested the tight supply situation would ease by next year, pushing producers to weigh expansion plans. By 2030, some 207 million tons of new annual LNG capacity is due to come online, though it's unclear who will buy it. Natural gas can generate power on demand and be stored for more than a couple of hours, unlike wind or solar — a dynamic that has pulled buyers back once prices fell in past oil and gas cycles.
Source: Commodities Analysis & Opinion
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