Middle East Supply Crunch Set to Ease as LNG Prices Decline
China and India's liquefied natural gas (LNG) imports are expected to recover from multi-year lows once the Middle East supply crunch ends, according to industry executives. The conflict in the region has disrupted LNG exports from Qatar and the UAE through the Strait of Hormuz, which previously carried around one-fifth of global LNG supplies.
The disruptions have pushed up LNG prices in Asia, with Asian spot LNG prices increasing to nearly $30 per million British thermal units (mmBtu), compared with around $10/mmBtu before the conflict. This has particularly affected demand in India, where several industries can switch to other fuels when natural gas becomes less competitive.
However, industry leaders believe that once the supply crunch ends and prices decline, LNG imports will recover. Shell estimates that around 36 million tons (mt) of LNG supplies from the Middle East have been lost so far this year. GAIL and PetroChina, China's largest LNG importer, have deployed trading teams to secure alternative LNG cargoes.
Industry leaders expect new LNG supply to come online over the next four to five years, which could ease prices and support long-term demand growth in India and China.