US Natural Gas May Rebound This Fall as LNG Exports Recover

US natural gas prices may be poised for a rebound this fall as competition in Europe and Asia to secure liquefied natural gas ahead of winter intensifies and a recovery in US LNG exports helps ease domestic inventory pressure.

LS Securities said on September 4 that European natural gas inventories currently stand at about 65% of storage capacity. Stockpiles were drawn down quickly last winter, and supply uncertainty has grown as the war involving Iran drags on. Even so, Europe has been relatively cautious in buying LNG.

Hong Sung-ki, an analyst at LS Securities, wrote that Europe appears to have delayed restocking at elevated prices in hopes the Iran conflict would end quickly. Natural gas prices in Europe and Asia have climbed more than 120% since the war began.

US natural gas prices, by contrast, have lagged the global rally. Domestic inventories remain above the five-year average, while second-quarter exports fell short of expectations because of scheduled maintenance at major LNG terminals and delays in starting new facilities.

That trend has recently begun to reverse. US LNG exports have picked up again since late last month, raising the possibility that increased imports by Europe and Asia ahead of winter will also affect the US supply-demand balance.

Higher exports could reduce pressure from domestic gas inventories. Hong said strong global LNG prices could spill over into US natural gas prices.

Natural gas prices typically strengthen in winter, when heating demand peaks. This year, however, the inventory-building period from September through November may have a greater influence on price moves. Forecasts for a super El Niño have raised the prospect that winter heating demand could be weaker than normal.

Related investment products have also rebounded recently. The United States Natural Gas Fund, an exchange-traded fund that tracks US natural gas futures and trades under the ticker UNG, is down more than 10% this year, but has gained 6.33% over the past month.

Still, US natural gas inventories remain above the five-year average. If the Iran situation eases faster than expected or the recovery in US LNG exports loses momentum again, the case for a price rebound could weaken.