Asian spot liquefied natural gas (LNG) prices have climbed to a five-month high, reaching an estimated $22.50 per million British thermal units (MMBtu) for October delivery into north-east Asia. This marks an increase from $21.30/MMBtu last week and is the highest level since March 20. The surge is primarily attributed to the ongoing impasse in the Strait of Hormuz, where U.S.-Iran talks to resolve the nearly six-month-old conflict have stalled, severely restricting LNG traffic.
The disruption has led to significant supply constraints, with only around 33 LNG cargoes exiting the Strait of Hormuz in the last six months, averaging about five per month, compared to normal levels of 90 to 100 per month. This situation has been exacerbated by QatarEnergy's extension of its force majeure on LNG deliveries into early November, impacting European and Asian buyers. Italian utility Edison, for instance, has had 29 cargoes canceled since April, representing approximately 3.8 billion cubic meters of natural gas, though they have replaced 21 of those.
The geopolitical premium is firmly embedded in the global LNG market, as noted by Arturo Regalado, senior LNG analyst at Kpler, with no immediate resolution in sight for the Strait of Hormuz. The prolonged disruption has removed most Qatari LNG from the global market, with Qatar exporting only 18 cargoes in the first six months of the conflict, a drastic reduction from 509 over the same period a year earlier. This has cost Qatar an estimated $24 billion in lost gas sales. While other exporters like the U.S., Canada, Nigeria, and Malaysia have increased output, they have not fully compensated for the shortfall. Consequently, Asian markets have seen softer-than-expected Chinese gas production and tighter Indonesian domestic balances, while nuclear outages in Japan also contribute to increased demand. Europe has also seen gas prices touch fresh five-month highs and has lost flexible U.S. LNG cargoes to Asia, receiving only 51% of U.S. exports from March-July 2026, down from 67% in the same period of 2025.
The tight supply situation leaves countries heavily reliant on Qatari or Emirati LNG, particularly those with significant short-term purchases, vulnerable. Pakistan, Bangladesh, and India are identified as particularly exposed. Japan is better protected due to a diversified portfolio of contracts. Analysts suggest that any progress in U.S.-Iran negotiations could reduce the geopolitical premium, but the current outlook indicates that a breakthrough is not imminent, keeping risks skewed to the upside for prices. The global market might not return to a comfortable supply-demand balance until 2028, later than the previously expected mid-2026. The spot LNG price in Asia reached $23.388 per MMBtu on Friday, according to traders cited by Bloomberg.
