Monsoon deficit supports India LNG

In the April-July period, India imported 11.86 billion cubic meters (bcm) of liquefied natural gas (LNG), marking a 5.3% increase compared to the same period the previous year, according to provisional data released by India's oil ministry. Monthly import volumes were 2.47 bcm in April, 2.96 bcm in May, 3.52 bcm in June, and 2.91 bcm in July.

The surge in LNG imports was primarily due to a decline in domestic production rather than an increase in demand. Gas production fell by 4.4% year on year to 11.1 bcm during the April-July period, while total gas demand rose by a mere 0.4% to 23 bcm. As a result, imports accounted for more than half of the consumption over the period, filling a gap left by diminished domestic gas fields.

This four-month period represents a shift from the previous fiscal year. LNG imports in FY2025-26 totaled 34.22 bcm, a 4.2% decrease year on year. The March figure of 1.95 bcm reflected disruptions in Middle East gas loadings during the Strait of Hormuz blockade. Domestic gas production fell by 3.5% to 34.33 bcm, while demand contracted by 3.9% to 68.54 bcm.

The India Meteorological Department (IMD) recorded a cumulative monsoon rainfall of 577.8 mm between June 1 and August 26, which is 13% below the normal of 664.7 mm. The deficit was concentrated in eastern and northeastern India, with a 27% shortfall and a 22% shortfall in the South Peninsula. The IMD forecast that September rainfall would be below 91% of the long-term average, with strong El Niño conditions in the equatorial Pacific expected to intensify.

Reservoir levels have been tracking the rainfall deficit, with national live storage standing at 125.30 bcm or 67.83% of capacity as of August 27, down from 153.08 bcm a year earlier. Weaker hydro availability into the post-monsoon period, combined with above-normal temperatures, has increased the call for thermal generation.

The fertilizer sector also provides support for LNG demand. The Cabinet Committee on Economic Affairs approved the National Investment Policy for Urea-2026 in July, targeting eight to nine new gas-based urea units and approximately 10 million metric tons of additional capacity. Despite a deficient monsoon typically boosting irrigated rabi acreage and urea consumption, a price constraint limits the impact.

In India, power and industrial buyers have historically curbed purchases at elevated LNG prices, relying instead on contracted volumes and city gas distribution off-take rather than opportunistic spot buying.