LNG Blows It Again

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The U.S. LNG industry has consistently misread supply and demand signals over the decades, from overestimating demand in the 1970s, to misjudging the effects of the shale revolution. Will it be different this time?

The expansion of LNG (liquefied natural gas) infrastructure in the U.S. post-shale boom was driven by the need to utilize the domestic natural gas surplus and meet the global demand for cleaner energy. The 2022 Russian invasion of Ukraine further accelerated this expansion as Europe sought to reduce its dependence on Russian gas, creating a significant market opportunity for U.S. LNG producers. 

Following its standard playbook, the industry seems to have overplayed its hand, and LNG has become a risky bet for 2024 and possibly well into the next decade. Prices are higher than earlier in the year but the demand picture is weak.

European gas prices have dropped to half of last summer’s levels, yet they remain 40% higher than in February (Figure 1). Meanwhile, Asian prices are at two-thirds of their October 2023 levels but still 55% above February’s. Currently, Asian gas prices are five times higher than those in the U.S., and European prices are four times U.S. levels.

Figure 1. European gas prices are half of levels last summer but 40% higher than in February.
Asian prices are two-thirds levels in October 2023 but 55% higher than in February. Asian prices are 5-times U.S. levels today and European prices are 4 times U.S.
Source: MarketWatch, Investing.com  & Labyrinth Consulting Services, Inc.
Figure 1. European gas prices are half of levels last summer but 40% higher than in February.
Asian prices are two-thirds levels in October 2023 but 55% higher than in February. Asian prices are 5-times U.S. levels today and European prices are 4 times U.S.
Source: MarketWatch, Investing.com & Labyrinth Consulting Services, Inc.

The forecast for supply, demand, and price in 2024 suggests that there will be an increase in supply capacity, varying demand trends across different regions, and potential price fluctuations depending on market conditions.

“Lackluster demand growth and a massive wave of new export capacity are poised to send global liquefied natural gas (LNG) markets into oversupply.


The LNG liquefaction capacity scheduled to come online by 2028 surpasses the International Energy Agency’s (IEA) demand forecast for 2050 by 38%.

Figure 2. Net Global LNG Supply Additions. Source: IEEFA.
Figure 2. Net Global LNG Supply Additions. Source: IEEFA.

Japan, once the world’s largest LNG importer, saw demand drop by 8% in 2023. Since 2018, annual LNG imports have declined by 20%. This trend is driven by a planned increase in nuclear and renewable energy generation, influenced by climate and energy policies and years of high LNG prices, which are likely to push demand even lower.

In South Korea, the largest buyer of U.S. LNG, imports fell by nearly 5% last year. South Korea’s long-term climate and energy strategies project a 20% reduction in LNG imports by the mid-2030s, as solar, wind, and nuclear plants become more prevalent.

Europe’s LNG imports remained steady in 2023, defying expectations of an increase to compensate for reduced Russian gas supplies. Europe’s overall gas consumption has decreased by 20% in the past two years due to high prices, energy security measures, and climate policies. Europe’s LNG demand is expected to go into long-term decline after 2025.

In China, falling prices led to an increase in LNG imports but now domestic gas production has surged to record levels in the first half of 2024.

“China appears to have taken advantage of low prices in the spot market so far in 2024 to boost the amount of gas in storage, absorbing some of the extra fuel that would otherwise have been sent to Europe.

“But as storage facilities fill and spot prices rise, the intake is likely to taper over the summer, redirecting more liquefied natural gas (LNG) cargoes to Europe and accelerating the fill rate at the other end of Eurasia.”


Enthusiasm for an exploding LNG market after 2022 led to accelerated LNG carrier construction. That is likely to result in falling shipping rates in 2024 and provide increased incentive for low-cost producers to continue to over-supply markets into the medium-term future. There are upside risk factors including weather dynamics, supply disruptions, and competition for LNG but, overall the outlook appears bearish.

Wood Mackenzie concluded that while Asian LNG demand is expected to grow by 5% in 2024, it is still projected to be lower than the levels reached in 2021. ​ This indicates that there may be challenges in achieving significant growth in LNG demand in the long term.

Shell, on the other hand, expects that the global LNG market will grow well into the 2040s, primarily fueled by China’s industrial decarbonization efforts and increasing demand from other Asian countries.  Gas demand is likely to peak after 2040.

“In the medium term, latent demand for LNG – especially in Asia – is set to consume new supply that is expected to come onto the market in the second half of the 2020s.”


I’m always suspicious of “latent demand” but even Shell’s forecast suggests that world supply will exceed demand for the next decade (Figure 3).

Figure 3. Global LNG supply vs demand forecast range.
Source: Shell.

Forecasts are no better than their assumptions but provide a meaningful summary of the present and the near term. I expect that the next few years will probably be bleak for LNG. Gas prices in the U.S. are unlikely to exceed a monthly average more than $3.00 per mmBtu over the next year, keeping the arbitrage favorable for exports. That should support the surplus that most forecasts indicate based on Shell’s estimate that the U.S. will supply at least 30% of global LNG.

The compounding uncertainties of geopolitics, economics and finance, supply chains, and governance make any projection beyond that suspect. It seems improbable that U.S. gas output will continue to grow, and that may potentially limit world supply and increase prices. Today’s U.S. spot price is about 35 percent higher than marginal cost indicates. I interpret that as a signal from markets for producers to add more drilling rigs to meet future supply needs.

For the next six to twelve months, it appears that the U.S. LNG industry has once again demonstrated its historical failure to anticipate markets. It could have been different this time but that would have required restraint.

Art Berman is anything but your run-of-the-mill energy consultant. With a résumé boasting over 40 years as a petroleum geologist, he’s here to annihilate your preconceived notions and rearm you with unfiltered, data-backed takes on energy and its colossal role in the world's economic pulse. Learn more about Art here.

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  1. Kevin Beck on July 1, 2024 at 8:26 pm


    Great analysis as always! I truly thank you and all the effort you put in, while making your work free for all to access.

    Do you think our genius politicians are aware of your first graph of Nat Gas prices for US vs Asia/Europe when they claim their policies are the reason the US has outperformed the world in the last few years?

    I know that sounds crazy. How could the most powerful people in the world not be aware of this. But they didn’t even mention energy in this most recent clown show debate. What do you think; Are they fully aware, but just playing politics, or do they truly believe their tax cuts or job creations, or whatever policies are the reason the US is outperforming?

    I go back and forth if they are really this ignorant, or if they just think we are.

    Thanks for all you do! Please keep it up!

    • Art Berman on July 2, 2024 at 11:58 pm


      Politicians and most people are energy-blind. Economists have convinced them that since energy is only 6% of GDP, it’s not that important.

      People have lost a lot of IQ and common sense over the last 75 years as they increasingly rely on technology to think and act for them. They only see parts, not the whole.

      All the best,


  2. tom abeles on June 30, 2024 at 3:23 pm

    what has been the impact of the Nord Stream pipeline and the US policies going forward?

    • Art Berman on June 30, 2024 at 4:44 pm


      I encourage you to research that subject.

      All the best,


  3. Bernei on June 30, 2024 at 2:40 pm

    Given the gap between world LNG prices and US prices for natgas it would appear there is still a strong case for US LNG exports which brings me to a “network” question. What is the ratio of export terminal capacity (plus ships) to LNG importing infrastructure by region?

    One would expect based on Figure 3 that input and export capacity should be matched but for example Japan’s 8% drop in imports means that export capacity is underutilized or going elsewhere (like China0

    • Art Berman on June 30, 2024 at 4:43 pm


      I encourage you to research that subject.

      All the best,


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