LNG gets too hot for Asia at $26, but India keeps buying

India is showing more resilience than some other major Asian buyers of liquefied natural gas (LNG), even as soaring prices threaten to push the region's demand lower for a second straight year.

Asian LNG demand is expected to fall 3-10% from 2025 levels this year, with Northeast Asia accounting for most of the decline, a Reuters report, citing analysts' estimates said.

Demand is expected to recover in 2027 as supply conditions improve.


Also Read: Asia cuts LNG buying, but $26 gas sends Europe shopping

India and Bangladesh, however, have continued to secure spot LNG cargoes despite the sharp rise in prices, the report said, highlighting the relatively resilient demand in parts of South Asia.

"In India, LNG demand is expected to remain predominantly supported by the city gas distribution and fertilizer sectors, which collectively account for approximately 70% of the country's total LNG imports," LSEG analyst Shruti Shah said in the report.

Bangladesh's spot LNG purchases, meanwhile, are being supported by the need for gas in baseload power generation.

Why Asian LNG demand is falling

Asian spot LNG prices have more than doubled since the conflict involving the US, Israel and Iran began on February 28. Prices have risen to around $26 per million British thermal units (mmBtu), their highest level since December 2022, as disruptions to Gulf supplies have tightened the market.

QatarEnergy declared force majeure and suspended exports after Iranian attacks damaged LNG infrastructure and knocked out 17% of Qatar's LNG export capacity, as per the report.

The price shock is weighing particularly heavily on Northeast Asia. China is expected to see LNG demand fall by 6.1 million tonnes year-on-year, according to Kpler data cited by Reuters.

High fuel costs have forced energy-intensive Chinese industries, including ceramics, methanol and glass, to reduce output or shut plants. Higher domestic gas production, increased pipeline imports and falling inventories have also reduced China's need for imported LNG.

Japan and South Korea have also seen lower gas demand, partly because temperatures were lower in several months this year, reducing the need for power generation.

India faces price pressure, but demand remains

India's LNG market is also feeling the impact of higher spot prices. GAIL Chairman Deepak Gupta told Reuters at the Gastech conference on September 15, that high prices were "definitely impacting" demand in India, with several price-sensitive industries switching to other fuels when gas becomes uneconomical.

Petronet LNG CEO Akshay Kumar Singh also at the conference, said that affordability remained a challenge, but added that there was still demand for LNG, albeit price-sensitive demand.

GAIL and PetroChina have also deployed trading teams to source alternative cargoes to replace Qatari and Emirati supplies.

Also Read: India, Asian peers pile up $7.4 billion spot-gas bill, turning wary of LNG

GAIL's Gupta said India had initially had to limit gas consumption but had subsequently restored supplies to around 90%-95% as it increased its ability to source LNG from elsewhere. He and PetroChina executives expect consumption to recover once prices fall and global supply improves.

What happens to LNG prices next

The outlook for 2027 will depend heavily on how quickly Gulf supplies recover and how much new LNG reaches the market.

Rystad Energy and Kpler expect Asian LNG demand to rebound to around 280 million tonnes in 2027, assuming QatarEnergy can resume exports through the Strait of Hormuz and ramp up production by the first quarter.

Prices, however, are expected to remain above pre-conflict levels. Kpler forecasts Asian spot LNG prices to average $19.30/mmBtu this year and $14.90/mmBtu in 2027. Rystad expects average prices to remain above $19/mmBtu in 2026 and around $17/mmBtu next year.

Wood Mackenzie expects prices to remain elevated even if LNG shipments through the Strait of Hormuz resume by the end of this year, as Europe will need to replenish depleted gas inventories ahead of the following winter.

The broader market therefore faces a delicate balance: high prices are curbing LNG consumption in parts of Asia, but Europe's need to rebuild inventories could keep competition for cargoes intense into 2027.