International Energy Agency Expects LNG Supply to Fall 3% in 2026
Key Facts
The International Energy Agency forecast in a report published on November 3 that global liquefied natural gas supply would fall 3%, or nearly 20 billion cubic meters, in 2026. The expected decline comes as LNG flows through the Strait of Hormuz have effectively halted, reducing available cargoes in a market whose importers rely on flexible supplies. The report estimated that loadings from Qatar and the UAE fell by more than 60 billion cubic meters between March and October. At the same time, the agency forecast global natural gas demand would decline by about 1.5%, or roughly 65 billion cubic meters, in 2026. That puts supply and demand on parallel downward paths, while competition for divertible cargoes remains a source of pressure on markets.
The agency linked the drop in shipments to the halt in flows through Hormuz, which affected loadings from Qatar and the UAE between March and October. Those loadings fell by more than 60 billion cubic meters, according to the report's estimate. The agency said the disruption pushed prices in Asia and Europe to their highest levels since the gas supply crisis of 2022-2023. The comparison shows that the impact of the disruption extended beyond supply volumes to prices in the two importing regions. Flexible cargoes remain a focus of competition as the relative attractiveness of markets shifts, since they can be redirected to different destinations.
The agency forecast global natural gas demand would decline by about 1.5%, or roughly 65 billion cubic meters, in 2026. It attributed this to lower demand in the Middle East, a decline in industrial consumption in Europe, and a shift from gas to coal in power generation in several Asian countries. The expected weakness in demand therefore stems from changes in consumption across major markets, rather than a single factor or region. But lower demand does not eliminate competition for available cargoes; the ability to address shortages depends on storage levels and options for replenishing inventories. This divergence is particularly evident as Europe enters the heating season with storage at historically low levels.
Gas storage sites in the European Union entered the 2026-2027 heating season at their lowest levels since 2013, according to the agency. This increases the region's reliance on global LNG imports during a period of rising demand for supplies. In Asia and South America, limited storage options for LNG importers constrain their ability to build large reserves. The agency said Europe's declining inventories, together with these constraints, “could tighten competition for a small number of flexible LNG cargoes in the coming months and put upward pressure on spot prices.” The agency linked this pressure to the possibility of rising demand; it did not describe prices as rising when the report was published.
Global trade in natural gas had increased 12% year on year between October 2025 and February 2026, before the supply disruption, while European and Asian price benchmarks fell by about 25% over the same period. After the disruption began, the price spread between the two regions reversed: Europe recorded a premium of $0.9 per million British thermal units in January and February 2026, then the average Asian premium reached $2.1 from March to June. The agency said this shift encouraged flexible LNG cargoes to be redirected from Europe to Asian markets. The comparison shows how price differences influenced cargo destinations as supplies through Hormuz declined. This forms part of a broader pattern in which competition among importers shifts with prices and cargo availability.
The agency's third-quarter report had based its forecasts on the assumption that the Strait of Hormuz would fully reopen in the third quarter of 2026 and that operations at undamaged facilities would be fully restored by early in the fourth quarter. Even so, the report said LNG flows through the strait remained below pre-conflict levels. The annual supply decline forecast in the November 3 report comes against a recovery that has not reached the level previously assumed, alongside the continuing impact of the shipment disruption. The available facts in the report do not give a figure for a direct comparison between the two forecasts, but they set out the assumptions behind the earlier outlook and the expected supply decline in 2026. European storage levels remain a key factor in determining how far market tightness extends into the following period.
The agency warned that lower European inventories could require a substantial increase in replenishment during the summer of 2027. This could keep global gas markets tight through next year, as Europe needs to buy additional volumes after the heating season. The agency said the need for injections “could increase to rebuild inventories during the summer of 2027.” With storage options still limited for importers in Asia and South America, flexible cargoes could remain contested in the coming months. The agency specifically linked this competition to the possibility of upward pressure on spot prices when demand rises.