Iran War and AI Boom Drive Global Gas Supply Crunch

Since the start of the year, LNG spot market prices in Asia have tripled, driving a global gas supply crunch. Asia and Europe are competing for a limited number of cargoes, with the U.S. exporting record volumes of the fuel. However, QatarEnergy has extended a force majeure on its own LNG exports, further exacerbating the shortage.

The Asia-Pacific trade benchmark for LNG has risen above $31 per million British thermal units, nearly quadrupling from just over $9 per mmBtu in January. The war in the Persian Gulf has severely impacted global gas supply security, as one of the top three liquefied gas exporters is currently off the market. The International Energy Agency estimates that the conflict caused a loss of 60 billion cubic meters of LNG in the eight months leading up to October.

While higher U.S. and African production has helped fill much of that gap, a 3% annual decline in global LNG production is still expected. This decline coincides with rising demand expectations due to the AI boom, as data centers require reliable energy sources like natural gas. Despite the disruption, the LNG industry has shown resilience in adapting to changing market conditions, with companies like QatarEnergy increasing their foreign gas purchases.

While some question the demand for LNG amid the conflict, historical patterns suggest limited and temporary demand dampening. Overall, the outlook for gas and coal remains positive, but coal is cheaper than gas.