India's natural gas demand has decreased by approximately 1.5 million tons since the beginning of 2026. This reduction occurs at a time when, prior to the onset of the Iran war, it was expected that LNG (liquefied natural gas) demand in South Asia would increase by about 7% compared to 2025. However, disruptions in Middle Eastern gas supply and rising prices of spot cargoes have altered the market outlook.
Reasons for the Decrease in Demand
Analysts predict that LNG demand in South Asia will decrease by a total of about 6 million tons. Oman has become India's largest supplier of liquefied natural gas in September 2026, replacing the United States. This change indicates that rising gas supply costs can seriously impact consumption growth forecasts and compel buyers to reduce consumption or delay purchases of expensive cargoes.
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One of the main factors behind the supply reduction is the restriction of LNG flows from Qatar and the United Arab Emirates due to the Iran war. A significant portion of these countries' LNG exports passes through the Strait of Hormuz, and disruptions in this waterway have made it difficult for importing markets to access Middle Eastern cargoes. This situation has led to delays or limitations in receiving shipments and increased competition for available LNG in the spot market.
Impact of Price Increases on Consumption
The increase in LNG prices has been one of the key factors in the reduction of consumption in India. Reports indicate that the price of cargoes purchased through tenders in India has reached about $26.4 per million British thermal units (MMBtu) by September. This figure ranged from about $16.8 to $18.8 per MMBtu between March and June. Therefore, the cost of purchasing new cargoes has significantly increased over a few months.
Despite this price increase, demand in India's tender purchases has remained resilient. This indicates that some consumers and importing companies need to purchase LNG to meet their needs, although higher prices may limit consumption in cost-sensitive sectors. Estimates suggest that the LNG supply crisis in Pakistan and Bangladesh has been more severe than in India.
Ultimately, the reduction of 1.5 million tons in India's gas demand indicates that rising prices are not just a business issue but can also affect energy consumption patterns in the country's economy. The future of LNG demand in India and other South Asian countries depends on the duration of disruptions in the Strait of Hormuz, the level of Qatar and UAE's export recovery, and the trend of spot prices.
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