The Middle East war has cut Persian Gulf LNG exports to a trickle and doubled global prices since January, pushing Japan and Pakistan back toward coal. Gas Strategies expects worldwide LNG demand to fall as much as 8% this year if the Gulf squeeze persists, even as producers plan a wave of new capacity by 2030.
Persian Gulf squeeze doubles prices to $22/MMBtu
The war has choked liquefied natural gas exports from the Persian Gulf to a trickle after it triggered a force majeure declaration at the world's largest single liquefaction hub, in Qatar. Since January, the price of LNG has doubled as importers bid up the scarce cargoes still reaching market during peak northern-hemisphere demand season.
Buyers who paid $10 per million British thermal units in January are now paying far more for the same gas. According to Pat Breen, chief executive of Gas Strategies, as quoted by The National: "paid $20 to $22/MMBtu for much of July".
Coal comeback signals demand destruction
Gas Strategies expects global LNG demand could dip 8% this year from 2025 if the flow of gas out of the Persian Gulf stays subdued. That squeeze has already pushed buyers away from natural gas and toward coal.
Japan, the world's second-largest LNG importer, and Pakistan have both turned back to coal power to cover the gap left by expensive cargoes. Europe is badly behind on its gas storage refill because of LNG prices.
China's rebound reshuffles the buyer map
China sharply cut its LNG purchases in the second quarter. But Kpler reported at the end of June that China was stepping up its liquefied gas purchases as electricity demand rose with the heat and domestic gas production slid lower.
The country is better placed than the European Union because it can draw on both LNG and Russian pipeline gas. The EU is importing Russian LNG at record rates. That flow is set to end at the start of 2027, when the bloc's ban on Russian gas imports takes effect.
Producers still bet on long-term growth
Despite the squeeze, Shell's end-of-June outlook still sees global LNG demand reaching close to 700 million tons annually by 2050. The supermajor said that would be up 65% from 2025 demand. Gas Strategies puts new liquefaction capacity coming online by 2030 at 207 million tons a year, though it remains unclear whether buyers will be there to absorb it once the war premium fades.
Source: Oilprice.com
Trading involves risk.
Risk Disclaimer
