India is currently refraining from signing long-term contracts for liquefied natural gas (LNG) as buyers in the country await a projected supply surplus that could lead to lower prices. According to sources familiar with the situation, Indian buyers, who are more price-sensitive than their counterparts in China, have postponed negotiations for over a year. The objective is to secure better terms as the LNG market shifts.
The Indian government aims to increase the share of natural gas in its energy mix to approximately 15% by 2030, nearly doubling the current consumption levels. Despite setting this target years ago, progress has been sluggish, largely due to high LNG prices that have deterred both spot market purchases and long-term agreements.
Market Dynamics Shifting Towards Buyers
Analysts predict that the LNG market will experience an oversupply later this year, creating a buyer’s market where India and other price-sensitive Asian countries could leverage their negotiating power. New LNG export projects and the ramp-up of recently commissioned facilities are expected to contribute to a 10% increase in global LNG supply for the year, according to analysts from Reuters. This shift is anticipated to alleviate tight market conditions that have persisted in recent years.
Two of the world’s leading LNG exporters, the United States and Qatar, are primarily responsible for the expected supply growth. As a result, Asian spot LNG prices and Europe’s benchmark prices at the Dutch Title Transfer Facility (TTF) are projected to decline. Although this may reduce profit margins for U.S. exporters, it is likely to stimulate demand across Asia, where buyers have become increasingly sensitive to import costs.
The International Energy Agency (IEA) has indicated that global LNG supply growth is set to accelerate significantly by 2026, with an increase of over 7%, marking the fastest pace since 2019. “The unfolding LNG wave is set to have a central role in shaping global gas markets in the coming years, likely putting downward pressure on prices and improving liquidity as regional gas markets become increasingly interconnected,” stated Keisuke Sadamori, IEA Director of Energy Markets and Security.
As the global LNG landscape evolves, India’s strategic hesitation in entering long-term contracts reflects a broader trend among nations seeking to balance energy needs with fluctuating market conditions. The upcoming supply glut may provide the leverage needed for Indian buyers to negotiate more favorable terms, reshaping the dynamics of energy consumption in the region and beyond.
