LNG Demand in China and India Could Surge When Prices Normalize
Industry executives say recent drops in LNG consumption in China and India stem from sharply higher spot prices after the Middle East conflict disrupted deliveries through the Strait of Hormuz. They expect demand in the two major Asian import markets to recover once the war eases and prices return to more typical levels.
Why It Matters
Asia accounts for the bulk of global LNG imports, so curtailed buying while prices are elevated affects global markets, energy security and short-term supply balances; a rebound in Chinese and Indian demand would materially influence future price and trade dynamics.
Key Facts
- Primary cause of recent demand drop: Spiking LNG prices linked to the Middle East conflict and closures of the Strait of Hormuz
- Affected exporters: Qatar and the United Arab Emirates (UAE) — LNG flows largely stopped or very low
- Oil workaround used by Persian Gulf producers: Shuttle-shipping crude through the Strait and transferring cargo offshore Oman
- Why LNG workaround is limited: Physical and chemical difficulties make ship-to-ship transfers of LNG rare and challenging
- Price level this week: October delivery into northeast Asia held above $25 per MMBtu this week (per report)
Executives at the Gastech conference in Bangkok told reporters that a sharp surge in spot LNG prices after the re-escalation of conflict in the Middle East has suppressed purchases in China and India. The fighting around Iran and the effective closure of the Strait of Hormuz have drastically reduced LNG shipments out of Qatar and the UAE, removing a significant portion of supply to Asian buyers. Producers in the Persian Gulf have been able to find practical detours for crude oil — for example, shuttle-shipping vessels through the Strait and transferring cargoes to other ships outside the chokepoint off Oman — but similar fixes have proved far harder for liquefied natural gas. Industry sources say ship-to-ship transfers of LNG are technically difficult and consequently only a handful of cargoes have been moved this way, leaving a large shortfall in supplies beginning in March. The supply disruption has pushed spot prices in Asia sharply higher; market data cited in the report showed October delivery into northeast Asia trading above $25 per million British thermal units. Executives from major buyers linked the price spike to weaker recent purchasing: GAIL’s chairman said sectors in India are particularly price sensitive, while PetroChina’s trading arm attributed lower volumes to the elevated cost environment. Despite the current slump, several senior industry figures said they expect demand to rebound once prices normalize after the conflict ends. PetroChina International’s leadership argued that Chinese demand is being temporarily suppressed by high prices and would recover when costs fall back toward historical levels under $10/MMBtu, although they also cautioned that long-term growth in China may not match the rapid expansion seen in the immediate aftermath of Russia’s invasion of Ukraine. Cost, reliability and flexibility were highlighted at Gastech as central considerations for Asian buyers as markets wait to see how the regional conflict and its impact on flows evolve.
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