Global liquefied natural gas (LNG) prices are projected to surge to their highest levels in over three years due to increased demand in Asia and Europe’s need to restock depleted inventories before winter. Morgan Stanley’s report anticipates the Asian LNG benchmark price to reach $25 per million British thermal units (mmBtu) in the third and fourth quarters of this year, marking a more than 30% rise from current levels. This potential price hike would be the steepest since early 2023 when European nations sought LNG aggressively to compensate for reduced gas supplies from Russia.
The report highlights that LNG prices are expected to stay elevated even if tensions in the Middle East ease in the short term. Disruptions in the Strait of Hormuz have significantly affected global LNG flows, crucial for exports from major producers like Qatar and the United Arab Emirates. Notably, natural gas consumption is rebounding in key Asian markets such as India and China, while Europe is under pressure to replenish inventories before winter.
Despite challenges in the Persian Gulf region, global LNG availability has been supported by increased production from facilities in other regions and the addition of new export capacity in North America. In May, global LNG supply was only marginally lower than the same period last year. Weather forecasts pointing to above-normal temperatures in parts of Asia during June and July are expected to further boost LNG consumption for cooling needs.
In Europe, gas demand dipped recently, but inventories remain well below historical levels. Storage levels are estimated to be 17% lower than a year ago and about 25% below the 10-year average, emphasizing the necessity for additional purchases in the coming months.
