Natural gas investors have a clearer market signal to watch after recent selling in US futures and a recovery in Asian LNG demand. The immediate issue is that gas prices are no longer being driven by one factor. Weather, storage, LNG flows and geopolitical supply risk are all influencing sentiment at the same time, which makes timing and positioning more important for investors exposed to the sector.
US natural gas futures recovered on Tuesday morning after bargain buyers returned following a weak start to the week. The move suggests that some traders viewed the previous sell-off as excessive, even though the market still faces mixed signals. Near-term summer demand remains supportive as hotter weather increases power-sector gas use, but cooler forecasts later in June could limit the strength of any price recovery.
Asian LNG demand is recovering after the Iran conflict disrupted flows through the Strait of Hormuz and temporarily removed a large share of global supply from normal trade. Asia is expected to receive 21.83 million tonnes of LNG in June, the highest level in five months and slightly above the same month last year.
China is returning to the market after a period of weak imports. Earlier this year, Chinese utilities reduced spot purchases as prices jumped after the conflict. Spot LNG for North Asia rose sharply from $10.40 per million British thermal units before the conflict to $25.30 in the week to 20 March, before easing and then moving back to $18.80 in the week to 5 June. China’s June imports are forecast at 4.48 million tonnes, down slightly from May but well above March and April levels.
Japan is also increasing LNG imports, with June arrivals estimated at 5.33 million tonnes, a three-month high. India is recovering too, with June imports expected to rise to 2.09 million tonnes as it sources cargoes from alternative suppliers including Angola, Nigeria and the United States.
Morgan Stanley’s view adds to the direct investment relevance. Its analysts expect Asian benchmark LNG prices to reach $25 per million British thermal units in the third and fourth quarters, supported by Asian heat, European restocking demand and a narrowing window to rebuild winter inventories. The firm also expects prices to rise even if the Middle East conflict is resolved quickly, because demand has already begun recovering while supply risk remains in the market.
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