What factors suggest that the predicted LNG glut might be coming to an end?

The liquefied natural gas (LNG) market faced concerns of a potential supply glut due to expanding production capacity. However, increasing gas demand, particularly in Asia, and shifts in global trade patterns are changing the narrative. Robust demand growth in Asia, exceeding 5% annually, suggests that excess production could be absorbed faster than initially projected, potentially leading to shortages.

Which regions are increasing their LNG export capacity, and how does this impact the global market?

Several regions are contributing to increased LNG capacity. Australia is poised to surpass Qatar as the leading LNG exporter, with further capacity expansions planned. The United States is expanding export capacity through new terminals and conversions of import facilities. Russia is also building up its LNG capacity, and in West Africa, Cameroon has joined Nigeria, Angola, and Equatorial Guinea as LNG-exporting countries.

Why is Chinese demand considered the most critical factor for the future of the LNG market?

The growth of Chinese demand is the most critical factor in determining the future tightness of LNG markets. China is expected to become the world's largest LNG importer, which will significantly impact the balance between supply and demand. If project delays or cancellations occur, the market could tighten after 2020, potentially leading to price increases.

How is the current oversupply affecting LNG pricing, and what could cause prices to rise in the future?

The current supply glut has kept LNG prices suppressed. Long-term pricing formulas influenced by crude oil prices further affect LNG pricing. In the short term, the oversupply may continue to limit price increases. However, potential project delays or cancellations, coupled with increased demand, particularly from China, could lead to tighter markets and potentially higher prices after 2020.

How has the relationship between gas production and demand influenced the move towards long-term supply contracts in the LNG market?

While global gas production has grown at a rate of just over 2% per year since 2009, and demand has increased at a similar pace, a mismatch occurred last year. Global production grew by an estimated 4%, while demand only increased by 3%. This imbalance has driven gas producers to secure long-term supply contracts. LNG is well-suited for these arrangements, as sellers are often also buyers, creating mutual interest in stable, long-term relationships.

Global LNG demand converging on Asia.

Is the LNG Glut Finally Coming to an End? A Global Energy Shift

Lena Kashyap in Business & Economy December 2025 • 4 min read.

"New Demand in Asia and Shifting Global Trade Patterns Suggest the Liquefied Natural Gas Market Could Tighten Sooner Than Expected."

The liquefied natural gas (LNG) market has been awash with new projects, leading to fears of a supply glut. As LNG production capacity expands, concerns have risen about the potential for this oversupply to persist for years. However, the narrative is evolving, driven by increasing gas demand and shifts in global trade.

The growth in demand for gas is accelerating, and this could absorb excess production faster than many forecasts suggest. Robust annual demand growth rates exceeding 5% in Asia hint at potential shortages in the region as early as 2020 or 2021. This article examines the dynamics influencing the LNG market, focusing on factors that could signal the end of the glut.

We will delve into production capacities, trade patterns, and the critical role of Asian demand. We'll explore new import regions and potential shifts in LNG pricing, providing a comprehensive overview of where the LNG market is headed. Understanding these shifts is crucial for investors, policymakers, and anyone interested in the future of global energy.

Production Oversupply: A Temporary Imbalance?

Since 2009, global gas production has grown at a rate of just over 2% per year. While demand has increased at a similar pace, prices have been weighed down by crude oil prices, influencing LNG pricing through long-term formulas. Last year, global production grew by an estimated 4%, while demand only increased by 3%. This mismatch has fueled concerns about oversupply.

This imbalance has pushed gas producers to secure long-term supply contracts. LNG is well-suited for these arrangements, as sellers are often also buyers, creating mutual interest in stable, long-term relationships. In the past year, 3.3 billion cubic feet per day (bn cfd) of new LNG capacity came online, and this year's total is projected to be 3.8 bn cfd, with more projects planned.

Key regions contributing to increased LNG capacity include:

Australia: Set to overtake Qatar as the world's leading LNG exporter, with plans for further capacity increases.
United States: Expanding export capacity by building new terminals and converting import facilities.
Russia: Building up LNG capacity.
West Africa: Cameroon has joined Nigeria, Angola, and Equatorial Guinea as LNG-exporting countries.

Despite the increase in export capacity, global trade in LNG is expected to reach about 41.5 bn cfd in 2018, compared to 38.5 bn cfd, revealing a smaller increase in trade compared to capacity. This capacity growth occurs amidst slow or negative demand growth in regions like Europe and the United States. While U.S. gas demand is rising, production is increasing even faster.

The Future of LNG: Tighter Markets Ahead?

While the current supply glut may keep a lid on LNG prices in the short term, potential project delays or cancellations could lead to tighter markets after 2020, potentially raising prices. The most critical factor will be the growth of Chinese demand, as China is poised to become the world's largest LNG importer.

With the prospect of less LNG availability, Asian prices could rise above $10 per million BTUs. However, the rising cost of LNG could make it less competitive against renewables in some countries, including China, which could eventually slow demand growth.

The LNG market is at a crucial juncture. While there are concerns about current oversupply, shifts in demand, particularly in Asia, and potential supply constraints suggest that the glut may be shorter-lived than anticipated. Keeping an eye on these evolving dynamics will be essential for understanding the future of global energy markets.