Liquefied natural gas flows from the Persian Gulf are still over 75 percent lower than they were before February 28, while heating demand rises ahead of winter. In September, 21 LNG cargoes are estimated to have exited the Strait of Hormuz, the highest monthly number since the Iran war began, yet down from over 60 before the war, according to shipping data compiled by Reuters. The extended force majeure that QatarEnergy has in place for its LNG industry and the increased frequency of tanker attacks in the waterway are the main constraints.
Coal is filling the gap because of price. Australian benchmark coal is trading at the equivalent of $5.40 per mmBtu, while Asian spot LNG for November cargoes topped $26 per mmBtu, up from $25.25 earlier in the week. In Europe, the November natural gas benchmark contract is trading at over 81 euros per MWh, and Asian spot prices have topped European prices, drawing cargoes eastward.
In September, the International Energy Agency said it expected demand for coal this year to rise to an all-time high, and coal buying is set for an especially strong fourth quarter as peak demand season begins. Japan, South Korea and China imported a collective 122 million tons of coal during the third quarter of this year, according to Kpler data reported by Reuters, and the three were importing at a rate of 143 million tons per quarter in the last three months of both 2024 and 2025. European coal imports have also risen strongly this year, with the June total up by 43 percent on the year.
Supply policy could tighten the market further into the peak season. Indonesia, the world’s largest coal exporter, has pursued production quotas and policy changes that saw its exports drop by as much as 23 percent in August, and the IEA expects Indonesian coal production to decline this year by over 12 million tons. Davenport Energy managing partner Toby Copson told Reuters that Asian demand remains price-sensitive, with Chinese buyers particularly unlikely to chase spot LNG cargoes unless prices mean-revert, which is currently unlikely.