By Joe Stonor and Adam Whittaker
Global supply of liquefied natural gas could contract this year if disruption in the Strait of Hormuz continues for a prolonged period, according to British energy major Shell.
Shell said Tuesday in its annual LNG report that global physical LNG cargos sold this year could be similar to the 422 million metric tons sold in 2025. It then expects a return to growth in 2027.
However, the forecast is dependent on shipping through the waterway returning to normal levels this summer. Continued disruption over the remainder of the year could result in a rare annual supply contraction, Shell said.
Prior to the conflict, Shell had expected global LNG sales to increase significantly over 2026.
This growth was undone by the war in the Middle East that upended global energy markets and left a fifth of global LNG supply unable to exit the vital waterway. Energy infrastructure in the region has also been hit, denting supplies over the near term.
While cargo-laden ships are currently exiting the strait, a peace agreement remains fragile, with the U.S. and Iran exchanging fire over the weekend. The two sides are expected to resume peace talks as soon as Tuesday.
If talks are successful, Shell expects 2026 to be a small blip ahead of a significant uptick in LNG usage through 2050. New supply will be powered by the U.S., which accounts for close to 60% of continuing LNG liquefaction projects, far ahead of Qatar's 15% in second place, according to the International Energy Agency.
Despite the war triggering the largest energy shock in history, a combination of U.S supply, stored inventory and fuel switching has so far helped keep global gas prices well below 2022 levels when Russia's invasion of Ukraine roiled markets and left Europe scrambling for alternative supplies, Shell said.
Around 15 million barrels of oil equivalent a day dropped out of global supply during the worst month of the crisis, Shell said. Over the course of the war, Asian benchmark gas prices peaked at $21.63 per million British Thermal Units, while European benchmark Dutch TTF contracts topped out at $18.33 per MMBtu. Both peaks were far below their 2022 highs, when Dutch contracts hit $71.55 per MMBtu.
Shell said U.S. exports of LNG for January through to May increased by around 10 million tons year-on-year. In comparison, exports from Qatar fell by just under 20 million tons from the year ago period.
U.S. supply was a lifeline for Asian countries, which were particularly vulnerable to the squeeze. Monthly exports to the region jumped from under 1 million tons in January to more than 4 million tons in May.
Despite the conflict highlighting vulnerabilities in LNG supply, global demand is set to soar to nearly 700 million tons a year by 2050, Shell said. This is an increase of around 65% from 2025 levels.
South and Southeast Asian countries will account for around 40% of global LNG imports by 2050, according to Shell. Growing populations and power demand from data centers will fuel much of this.
Shell expects that significant investment in new LNG liquefaction plants will be needed, with around 200 million tons a year of new supply needed on top of projects already under construction.
Write to Joe Stonor at josephmichael.stonor@wsj.com and Adam Whittaker at adam.whittaker@wsj.com