Global natural gas demand is projected to decline by about 0.5% in 2026, marking the third annual contraction of the decade, according to a new report by the International Energy Agency (IEA) Tuesday.
The agency said in its Gas Market Report Q3-2026 that the de facto closure of the Strait of Hormuz following the outbreak of war in late February disrupted nearly one-fifth of global liquefied natural gas (LNG) supply, triggering sharp price volatility and reversing the market rebalancing that had begun in the second half of 2025.
While an interim agreement between the US and Iran has created a framework for reopening the Strait, uncertainty remains over when normal trade flows will fully resume. The IEA assumes the waterway will reopen in the third quarter, allowing LNG exports from Qatar and the UAE to gradually recover between July and October.
LNG exports from Qatar and the UAE dropped by 35 billion cubic meters (bcm) year-on-year between March and June. Higher output from new projects in North America and Africa, together with improved feed gas availability at existing facilities in Africa, Asia and Russia, offset roughly three-quarters of the decline.
As a result, global LNG production fell by 4%, or 8 bcm year-on-year, from March to June. To help ease supply constraints, the US approved higher export volumes from the Plaquemines LNG and Elba Island plants, while Australia and Singapore issued a joint statement supporting the flow of essential goods, including LNG.
- Gas prices remain elevated
Natural gas prices in Asia and Europe surged after LNG flows through the Strait of Hormuz were disrupted, with both regions recording their highest monthly average prices since January 2023 in March, according to the report.
Europe's benchmark TTF averaged nearly $16 per million British thermal units (MMBtu) in the second quarter, up 32% from a year earlier, while Asia's Platts JKM averaged $17.5/MMBtu, up 45% year-on-year.
The announcement of the interim US-Iran agreement and expectations of a full reopening of the Strait of Hormuz later put downward pressure on prices, sending TTF month-ahead futures down 6% and Platts JKM 12% lower between June 15 and June 26. Even after the decline, prices remained well above 2025 levels.
- Demand set for third annual decline of decade
Global gas demand contracted in the first half of 2026 as elevated spot prices curbed consumption across key LNG importing markets.
Demand in Asia fell about 0.5%, reflecting an estimated 4% decline in China, where stronger domestic gas production also reduced LNG imports by 12% from a year earlier. In OECD Europe, gas consumption slipped about 0.5% as stronger renewable output reduced gas use in the power sector.
The IEA expects global gas demand to fall by around 20 bcm or 0.5% in 2026, following declines in 2020 and 2022.
Demand in the Middle East is projected to contract by about 4%, marking the region's first annual decline since 1993 as damage to gas production and processing facilities, along with weaker output from gas-intensive industries, weighs on consumption.
Asia's gas demand is forecast to decline by 0.5% as higher LNG prices spur gas-to-coal switching in the power sector and reduce operating rates across gas- and energy-intensive industries. In Europe, gas demand is expected to fall by more than 2% as stronger renewable power generation and higher natural gas prices weigh on consumption.
Gas demand is forecast to remain broadly flat in Africa, rise by 3% in Central and South America, edge lower in North America and increase by nearly 3% in Eurasia.
By Duygu Alhan
Anadolu Agency
energy@aa.com.tr
