The global gas supply is facing a significant crunch, driven by the war in the Persian Gulf and surging demand from the artificial intelligence boom. LNG spot market prices in Asia have tripled since the start of the year, with the Japan-Korea Marker benchmark reaching $31 per million British thermal units this month, briefly hitting $33 per mmBtu. This sharp rise reflects the impact of the conflict, which has taken one of the top three LNG exporters, Qatar, off the market.
The International Energy Agency (IEA) estimates that the war has cost the world 60 billion cubic meters in LNG supply losses over the past eight months. While the U.S. and Africa have boosted production to fill some of the gap, the IEA warns that global LNG production will decline by 3% this year, the steepest annual drop on record. This comes as demand expectations rise due to the AI-driven construction of data centers, which rely heavily on natural gas for reliable power.
Shell's LNG Outlook 2026 predicts a 65% surge in demand for liquefied gas between this year and 2050, despite the disruption in Qatari exports. QatarEnergy has secured long-term LNG supply deals with U.S. companies, signaling confidence in the resilience of LNG demand. However, some analysts suggest that the war-related price surge could temporarily dampen demand, though historical patterns indicate that demand for energy commodities tends to be inelastic.
Despite a 1% global decline in gas consumption over the first nine months of the year, the long-term outlook for LNG remains optimistic. Unfortunately, the cheaper cost of coal compared to gas suggests a bleak outlook for reducing emissions, as coal consumption is likely to rise in response to the gas supply crunch.