LNG Slowdown in Asia Masks a Bigger Surge Ahead
Irina Slav

Demand for liquefied natural gas from the biggest importing region—Asia—has remained strong this year, although it has experienced a certain softening compared to last year. Prices are to blame for the softening—and they’re about to slide lower and reverse the demand trend.

Asian LNG importers bought 112.45 million tons of LNG over the first five months of the year, Reuters’ Clyde Russell wrote this week, citing data from Kpler. This was down 6.2% on the first five months of 2024. and most of the decline came from China, which sunned pricy spot market LNG.

In May alone, however, LNG shipments to Asian countries inched higher than they were in April, although the total figure remained lower than the total for May last year. The reason was probably the same as the reason for the lower five-month imports: prices. LNG prices trended higher earlier this year than last mostly because of Europe. After two mild winters, Europe assumed its demand for gas—and LNG specifically—was more or less set, but it wasn’t.

The winter of 2024/25 was colder than the two last ones, and demand for gas surged, leading to a corresponding surge in imports, which, in turn, pushed international spot market prices higher. At one point, the supply situation got so grave that Europe had to divert LNG cargos from Australia and Oman, not to mention its record purchases of Russian LNG, which the European Union has been trying to give up. This is about to happen again later this year, by the way. Europe, as well as Asia, will need to stock up on gas for next winter season—except perhaps China.

China has been building its natural gas stocks conscientiously ever since its 2017 gas crunch, which saw parts of the country lose power and heating due to the premature switch from coal to gas without securing enough supply. Eight years on, China had comfortable levels of gas in stock and a trade beef with the U.S., so its LNG imports over the first quarter of 2025 fell to the lowest in five years. A mild winter helped as well.

The trend continued in the second quarter as well, with Chinese LNG imports seen 20% lower in April 2025 than they were in April 2024. This is dragging Asia’s total lower and, for some, creating the impression that overall LNG demand in the biggest importing region is going down on a sustainable curve because of alternative energy sources. This, however, is not exactly the case, and China is the best illustration.

The world’s biggest wind and solar investor, home to the biggest capacity of both by far continues to be also one of the largest gas importers in the world. China’s alternative energy growth keeps breaking record—and gas imports remain substantial despite the annual drop attributable to weather patterns and solid stockpiling.

Europe is another illustration of the robustness of the international gas market. Earlier this month, the continent saw a sudden jump in gas prices because of a production outage at a Norwegian offshore platform. Europe, like China, is betting a lot on alternative energy sources. Yet despite a surge in capacity, it still, like China, remains very much dependent on gas, as shown by the price spike following the outage at the Troll field.

Meanwhile, LNG prices are about to move higher after their slide earlier in the year. At the start of May, the spot price fell to $11 per million British thermal units, but since then, it has climbed to $12.40 per mmBtu, as of the week to May 23. As Reuters’ Russell points out in his column, this is probably due to supply constraints as Chevron’s Wheatstone LNG plant entered maintenance and Freeport LNG in the U.S. experienced yet another outage.

Demand is about to start climbing as well. One reason is the seasonal peak in demand that comes with higher summer temperatures in the northern hemisphere. The other is, yet again, Europe and its gas storage refill drive, which occurs regularly in the middle of the year. This year, Europe will need to buy more gas than in the last two. The winter of 2024/25 depleted its stocks, and President Trump has demanded more LNG purchases to shrink the EU’s trade surplus with the United States.

Currently, Europe’s gas stocks are at around 47%, but this will need to rise substantially ahead of next winter. LNG purchases in Asia will pick up as well, with Trump’s crusade against what he sees as trade injustice adding to demand drivers over the next few months. So, while Asia’s demand for liquefied gas may be experiencing a lull, it is a temporary lull. There are simply very few alternatives that are on par with gas as a primary source of energy.

By Irina Slav for Oilprice.com

 

 

 

Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.

 

 

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