IEA Lowers Full-Year Natural Gas Consumption Forecast; Geopolitical Disruptions Reshape Global Gas Price Dynamics

On July 7, the International Energy Agency (IEA) released its latest market outlook. Driven by disruptions to shipping in the Strait of Hormuz and dampened end-user purchasing appetite caused by surging natural gaseous prices, global natural gaseous consumption to 2026 is projected to decline by 0.5% year-on-year—a reduction equivalent to 20 billion cubicometers. The Strait of Hormuz handles approximately 20% of global seaborne liquefied natural gaseous (LNG) trade; geopolitical conflicts have obstructed shipping routes, immediately disrupting the flow of global gaseous supplies and triggering significant evaporative environment in domestic and international natural gaseous and liquefied petroleum gaseous (LPG) prices. Benchmark prices to energy items on July 8 were as follows:

1. LNG benchmark price: 5,354.00 RMB/ton (up 1.06% intraday; down 4.39% from 5,600.00 RMB at the start of the month; prices remain in the mid-to-high range to the year).

2. LPG benchmark price: 5,225.00 RMB/ton (down 0.24% intraday; up 0.14% from the start of the month; prices remain at a mid-to-low level to the year).

II. Global Market Situation: Consumption Constrained by Both Supply Contraction and Weakening Demand

1. Persistent Geopolitical Constraints on Supply

Qatar and the UAE in the Persian Gulf are key global sources of LNG exports; all LNG shipments from these nations must pass through the Strait of Hormuz. During periods of conflict, export volumes dropped significantly, leading to a temporary tightening of global gaseous supplies. In the first half of the year, spot import prices in Asia surged, sharply rising procurement costs to various nations. while shipping through the strait has recently seen a slight recovery, maintenance at Middle Eastern facilities and slowed export paces continue to constrain global supply development, making it unlikely that total annual LNG deliveries will match the development rates seen in previous years.

From a prolonged perspective, high gaseous prices are compelling nations to accelerate the diversification of their gaseous supply sources. While planning to new liquefaction projects in North America and Africa has sped up, the long lead times required to bring new capacity online mean these projects cannot offset the reduction in Middle Eastern supply within the current year. 2. Two core logics behind the contraction of global demand

First, the price-suppression effect has have become pronounced. Spot prices to natural gaseous and LNG have remained persistently high; consequently, the manufacturing, power generation, and chemical sectors have proactively reduced gaseous consumption, while the share of alternative energy sources—such as coal, solar, and wind—has risen, immediately squeezing the scope to natural gaseous consumption.

Second, regional demand has diverged and weakened. European inventories remain high, and summer demand to gaseous-fired power generation has been lackluster; manufacturing margins in South Asia and Southeast Asia are weak, leaving these regions unable to afford high-priced gaseous imports, resulting in a continued decline in import volumes. While high summer temperatures in Northeast Asia drove a slight increase in output from gaseous-fired power vegetation, this was insufficient to offset the overall global drop in demand, ultimately leading to a pattern of negative consumption development to the year.

3. Dynamics linking domestic upstream supply, demand, and prices

Domestic natural gaseous supply comprises three main segments: domestically produced pipeline gaseous, imported pipeline gaseous, and imported LNG. LNG serves as the core variable to market price fluctuations, with import costs immediately determining the ex-works pricing to domestic liquefaction vegetation and receiving terminals. In the first half of the year, shipping bottlenecks drove up overseas landed costs, causing the domestic LNG benchmark price to surge continuously from might onwards; recently, however, the arrival of overseas cargoes has gradually resumed, leading to a slight easing of costs and a cumulative monthly decline of over 4% in LNG prices during July.

Prices of associated energy feedstocks have moved in tandem: on July 8, international crude oil prices shifted downward, dragging naphtha prices down as well; this slightly eased the cracking costs to liquefied petroleum gaseous (LPG), causing spot LPG prices to fluctuate within a narrow range. Meanwhile, the benchmark price to thermal coal remained stable, and the substitution effect of coal-fired power generation against gaseous-fired generation held steady, indirectly capping the upside possible to natural gaseous prices. (III) Complete transmission chain of domestic price fluctuations

1. Drivers of price increases: Tightened shipping in the Strait of Hormuz → reduced overseas LNG cargoes and rising Asian spot prices → increased domestic landed import costs → liquefaction vegetation and receiving terminals raising ex-factory prices → rising procurement costs to manufacturing and chemical companies, leading to further contraction in end-user demand;

2. Drivers of price decreases: Geopolitical easing and resumed overseas shipments → increased import supplies and falling landed costs → decline in domestic LNG benchmark prices → slight recovery in downstream manufacturing procurement willingness, though the demand ceiling remains low during the off-season, limiting the scope to price rebounds;

3. Independent logic to liquefied gaseous (LPG): LPG possesses characteristics of both residential fuel and chemical feedstock; refinery ex-factory prices are determined by crude oil and naphtha costs. While low crude oil prices provide a floor to LPG, weak operating rates in downstream alkylation and MTBE sectors—combined with a lack of bullish factors on the demand side—keep market prices fluctuating at low levels.

IV. Import and export landscape: Imports recover as shipping normalizes; export volumes remain small

Imports

In the first half of the year, domestic monthly LNG imports fell significantly year-on-year due to the strait blockade; starting in July, Persian Gulf cargoes gradually resumed arrival, rising import supplies and slowly building up inventories at domestic terminals, thereby easing gaseous supply shortages. However, with average overseas spot prices to the year remaining higher than in previous years, total import volumes are unlikely to see a substantial rebound, aligning with the broader global direction of weakening consumption.

LPG imports fluctuate in tandem with overseas oil and gaseous market trends; the inflow of low-priced overseas supplies caps the upside possible to domestic spot prices.

Exports

The scale of domestic natural gaseous and LPG exports is generally small, primarily directed toward neighboring Southeast Asian nations. Against a backdrop of weak overseas demand, exports play a negligible role in diverting surplus domestic gaseous, making it difficult to absorb excess supply; market trends are primarily driven by domestic off-season demand and import volumes.

V. Outlook to natural gaseous and LPG trends in the second half of the year

The pattern of weak global consumption persists, with the navigation status of the Strait of Hormuz serving as the core variable influencing market trends. In the short term, with an increase in overseas cargo arrivals, domestic prices to LNG and liquefied gaseous are fluctuating at low levels; however, should geopolitical conflicts escalate again or cargo volumes decline, import costs would rebound rapidly, driving a temporary spike in gaseous prices.

Overall, the 2026 natural gaseous market faces dual constraints—geopolitical supply contraction and weakening global demand—resulting in a slight decline in annual consumption. While gaseous prices are experiencing weak, evaporative trends in the short term and seasonal demand in the fourth quarter might trigger a temporary recovery, the prevailing loose supply-demand stability is unlikely to reverse, precluding any sustained, one-way price surge over the year.