Asian LNG demand set to fall for second year as war shrinks supply

• China's LNG demand is expected to drop 6.1 million tons year-on-year as high prices force energy-intensive industries like ceramics, methanol, and glass to cut output or shut plants
• Asian spot LNG prices have more than doubled to $26 per mmBtu since the conflict began in February, reaching their highest level since December 2022
• Analysts forecast prices will remain elevated through 2027, averaging $14.90-$19/mmBtu, driven by Europe's need to replenish depleted gas inventories and continued supply constraints from damaged Qatari export capacity

Summary: Asian LNG Demand Set to Fall for Second Year as War Shrinks Supply

Asian liquefied natural gas (LNG) demand is projected to decline 3-10% in 2026 compared to 2025 levels, marking the second consecutive annual drop due to supply disruptions from the US-Israeli war on Iran. The conflict, which began February 28, has severely impacted Gulf supplies and pushed Asian spot LNG prices to $26 per million British thermal units (mmBtu)—more than double pre-conflict levels and the highest since December 2022.

Key Impacts by Region:

Northeast Asia faces the most significant demand destruction, with China's LNG demand expected to fall 6.1 million tons year-on-year according to Kpler. High prices have forced energy-intensive industries including ceramics, methanol, and glass to cut output or shutter plants. Countries have compensated by utilizing coal and nuclear power alternatives, while lower temperatures reduced power generation needs in Japan and South Korea.

Supply Disruptions:

Iranian attacks damaged QatarEnergy facilities, eliminating 17% of its LNG export capacity and forcing the top global exporter to declare force majeure. The disruption derailed expectations for a 4-7% demand recovery in 2026.

Resilient Markets:

India and Bangladesh continue active spot cargo procurement. India's demand remains supported by city gas distribution and fertilizer sectors (70% of imports), while Bangladesh's baseload power generation drives purchases.

Outlook:

Analysts forecast demand rebounding to approximately 280 million tonnes in 2027, assuming Qatari exports resume by Q1 2027. However, prices are expected to remain elevated: Kpler projects $19.30/mmBtu average for 2026 and $14.90/mmBtu for 2027, while Wood Mackenzie expects $15-20/mmBtu through 2027, driven by European inventory replenishment needs.