Asian LNG Demand Set for Second Year of Decline Amid US-Iran Conflict

Asian liquefied natural gas (LNG) demand is expected to decline for the second consecutive year due to the ongoing conflict between the US and Iran, which has curtailed supplies from the Gulf. The disruption in supply has led to a sharp increase in prices, with Asian spot LNG prices more than doubling to $26 per million British thermal units (mmBtu), their highest since December 2022.

Rystad Energy analyst Lu Ming Pang noted that 'A lot of that demand destruction has been absorbed by Northeast Asia ... they have coal, they have some nuclear availability.' He also mentioned that average temperatures in several months this year were lower than last year, reducing the need for power generation.

The decline in demand is most pronounced in China, where it is expected to fall by 6.1 million tons year-on-year due to high prices weighing on industrial gas consumption. Energy-intensive sectors such as ceramics, methanol, and glass have had to cut output or shut plants because fuel costs have become uneconomical.

However, despite high prices and constrained supply, India and Bangladesh continued to actively secure spot cargoes, demonstrating resilient demand. Analysts expect Asian LNG demand to rebound in 2027, but prices are expected to remain well above pre-conflict levels.