LNG Forecasts Decline: Supply Surges, Demand Softens
- Anonymous
- 3 days ago
- 5 min read
Global Liquefied Natural Gas (LNG) markets are entering a turning point. The United States and Qatar, are leading a wave of new supply, building faster than demand can adjust. In recent years, LNG demand growth has weakened, particularly in Asia, reducing its role as the marginal buyer and forcing flexible cargoes to be redirected, with Europe acting as a temporary absorber. However, long-term gas demand growth is still expected to be driven by Asia.
Why This Matters
Supply is locked in, but demand is no longer doing the balancing, increasing the risk of prolonged market softness and price volatility.
Price signals now matter more than volumes, as spot markets and shipping economics drive where LNG clears.
Long-term growth depends on Asia, making the timing of demand recovery critical for market rebalancing.
Supply: A Locked-In LNG Wave Is Reshaping the Market
The global LNG market is entering a phase of great supply expansion. Estimates from Mordor Intelligence suggest that global LNG production capacity reached 474 million tonnes per annum (MTPA) in 2024, is expected to rise to 511 MTPA in 2025, and is projected to grow at a compound annual growth rate of 8.35% through 2030, reaching around 763 MTPA by the end of the decade.
This supply wave is highly concentrated and largely irreversible. According to Gas 2025Â report from the International Energy Agency (IEA), most LNG capacity additions through 2030 will be concentrated in a small number of exporters.
In the United States, over 80 billion cubic metres (BCM) per year of liquefaction capacity was approved in 2025 alone, an all-time high that puts the country on track to supply nearly one-third of global LNG by the end of the decade. Qatar, meanwhile, continues to expand capacity through its North Field project, reinforcing its role as a core low-cost supplier. Much of this new capacity has already reached final investment decision, meaning volumes will come online largely irrespective of near-term demand conditions.
Demand: Weakening Growth Is Reshaping LNG Flow Patterns
On the demand side, growth has failed to keep pace with the scale of supply expansion. This slowdown is best understood as a multi-year adjustment rather than a one-off shock.
In 2022, following Russia's invasion and war against Ukraine, Europe aggressively bid for LNG at almost any price to replace lost pipeline gas, effectively crowding Asian buyers out of the spot market. Asian importers, particularly China, responded both voluntarily and involuntarily by reducing LNG purchases and turning to alternative sources such as coal, nuclear, hydropower and domestic gas, embedding a higher degree of demand flexibility into their energy systems.
However, the anticipated rebound in Asian LNG demand failed to materialise. Markets had widely expected a strong recovery driven by China’s reopening and a return of LNG demand, yet industrial gas consumption recovered only modestly, while incremental power demand was increasingly met by renewable generation rather than gas-fired output.
Against this backdrop, since the start of 2025, Asian LNG imports declined by around 5%Â year-on-year, reflecting persistently high inventories, weaker macroeconomic momentum, and heightened price sensitivity across key markets including China, Japan, and South Korea.
As Asian buyers ceased to act as the marginal purchasers, flexible LNG cargoes that would traditionally clear in Asia were increasingly redirected to Europe. According to the IEA’s Gas 2025 report, European LNG imports rose by around 28% year-on-year in the first nine months of 2025 (approximately +27 BCM), supported by extensive LNG infrastructure, including Floating Storage and Regasification Units (FSRU), large storage capacity and flexible power and industrial demand, positioning Europe as the market’s primary short-term demand sink rather than a source of underlying demand growth.
Over the medium-to-long term, however, global gas demand is still expected to grow, with Asia driving most of the increase. While Europe’s gas demand is largely a legacy of a mature energy system undergoing substitution, Asia’s demand growth is driven by rising electricity needs, ongoing industrialisation, and fuel switching from coal, making it the only region capable of sustaining long-term growth in LNG consumption.
The IEA projects that European gas demand will decline by around 8%Â by 2030, reflecting efficiency gains, renewable deployment, and structural shifts in industrial activity. In contrast, Asia-Pacific is expected to account for around half of global gas demand growth through 2030, cementing its role as the dominant long-term driver of LNG consumption.
Detailed Regional Demand Insights
Northeast Asia (China, Japan, Korea)
LNG demand is stable but cautious. These markets still use a lot of gas, but they are no longer rushing to buy spot cargoes. High inventories and strong growth in renewables mean buyers can wait for lower prices.
South Asia & Southeast Asia (India, Pakistan, Bangladesh, ASEAN) LNG demand is highly price-sensitive and infrastructure-limited. These countries want more gas, but often cannot afford spot LNG when prices rise, or lack terminals and pipelines to take extra volumes. Pakistan illustrates the extreme price sensitivity of LNG demand in South Asia: imports rise sharply when prices are low but collapse quickly when LNG becomes unaffordable.
Europe
Europe acts as a short-term absorber, not a growth market. Gas consumption is structurally declining, but strong LNG infrastructure, storage, and flexible power demand allow Europe to take surplus LNG when Asia does not. Europe is buying LNG not because it needs more gas, but because it can take it when others step back. Croatia stands out as an exception in Europe, not because of rising domestic gas demand, but because of its growing role as a regional LNG entry point following the expansion of the Krk terminal.
The Americas (North & Latin America) LNG demand growth is uneven and mostly regional. North America is dominated by supply rather than demand, while Latin America uses LNG mainly as a backup fuel during droughts or power shortages. Brazil is a good example: LNG imports rise in dry years and fall quickly when hydropower recovers.
Middle East & Africa
In the Middle East, gas demand growth is largely driven by power generation and cooling needs, but LNG plays a supplementary role rather than a structural one, as many countries rely primarily on domestic gas production or pipeline supply.Across much of Africa, LNG demand remains highly price-sensitive and infrastructure-limited. High spot LNG prices have postponed the start-up of many proposed import terminals, meaning LNG demand is expected to materialize only later in the decade if global markets loosen and prices fall.
Take Action
Policymakers & Regulators: Plan for demand volatility by strengthening storage, infrastructure flexibility, and market transparency, rather than assuming steady LNG demand growth.
Investors: Stress-test LNG investments against slower Asian demand recovery timelines and prolonged spot market softness before committing to post-2030 capacity.