Shell warns global LNG supply may hold flat at 422 million tons

Global liquefied natural gas supply risks a rare annual contraction if the Strait of Hormuz closure persists, Shell said Tuesday.

Shell expects global LNG trade to hold at about 422 million metric tons in 2026, flat from a year earlier, as the Strait of Hormuz disruption traps roughly a fifth of global supply behind the vital waterway. The forecast, published in Shell's annual LNG Outlook 2026, assumes shipping through the strait returns to normal levels this summer.

"The conflict has triggered the largest energy shock in history, but a combination of U.S. supply, stored inventory and fuel switching has kept prices well below 2022 levels," Shell said in the report.

U.S. LNG exports rose about 10 million tons year-on-year in the January-to-May period, while Qatar's exports fell by nearly 20 million tons from a year earlier, Shell said. Monthly U.S. shipments to Asia surged from under 1 million tons in January to more than 4 million tons in May as Asian buyers scrambled for alternative supply. Asian benchmark gas prices peaked at $21.63 per million British thermal units during the crisis, while European Dutch TTF contracts topped out at $18.33 per MMBtu — both far below the 2022 highs when TTF hit $71.55 per MMBtu after Russia's invasion of Ukraine.

If the Strait of Hormuz disruption continues through the remainder of the year, global LNG supply could see a rare annual contraction, Shell said. The U.S. and Iran exchanged fire over the weekend, though the two sides are expected to resume peace talks as soon as Tuesday. Prior to the conflict, Shell had expected global LNG sales to increase significantly over 2026.

U.S. Supply Emerges as Critical Lifeline

The crisis has reshaped global LNG flows. Around 15 million barrels of oil equivalent a day dropped out of global supply during the worst month of the conflict, Shell said. U.S. exports have filled part of the gap, with American projects accounting for close to 60 percent of continuing LNG liquefaction developments worldwide, according to the International Energy Agency. Qatar holds about 15 percent of projects under development.

The war in the Middle East upended earlier growth projections, leaving cargo-laden ships unable to exit the Strait of Hormuz and damaging energy infrastructure in the region. Despite the supply shock, stored inventory and fuel switching have helped keep global gas prices well below 2022 levels, Shell said.

Long-Term Demand Outlook Remains Bullish

Despite the near-term disruption, Shell projects global LNG demand will rise about 65 percent from 2025 levels to nearly 700 million tons a year by 2050. South and Southeast Asian countries will account for roughly 40 percent of global imports by that time, driven by growing populations and power demand from data centers.

To meet that demand, Shell estimates about 200 million tons a year of new liquefaction capacity will be needed on top of projects already under construction. The last time the industry faced a comparable supply-demand imbalance was in the early 2010s, when a wave of U.S. Gulf Coast LNG projects came online to meet Asian demand following the Fukushima disaster.

This article is for informational purposes only and does not constitute investment advice.