LNG Markets Brace for Winter Uncertainty as Prices Top $30

Europe starts the season with its lowest gas inventories of the 2020s. With Middle Eastern LNG absent from the Pacific basin, competition for US cargoes is intensifying. Europe may have to pay heavily to keep inter-basin arbitrage closed, while relying on a mild winter to naturally limit demand.

In Northeast Asia, forecasts point to a mild winter, reducing demand for gas used in heating and power. LNG prices of $30 per MMBtu or higher also make gas less attractive, encouraging greater coal use. Improved nuclear availability is expected to further reduce gas demand in Japan and South Korea.

The United States is more insulated from the global rally. Henry Hub, which stayed near $3 per MMBtu through the summer, is expected to peak around $4 this winter. Strong production and healthy inventories are keeping prices subdued, while highly utilized liquefaction capacity limits the US market’s exposure to global prices.

El Niño—warm surface water in the central and eastern equatorial Pacific—is expected to influence weather worldwide and weigh on overall gas demand. It does not rule out cold spells, however, and droughts could raise regional demand. Colombia and Brazil are key uncertainties because their power generation depends heavily on hydropower.

The Strait of Hormuz, through which LNG from Qatar and the UAE is shipped, has been repeatedly targeted during the Middle East conflict. Transits stabilized in October, potentially allowing supply to recover by the second quarter of 2027. But another escalation could sharply reduce output. Egypt is expected to have spare regasification capacity this winter and may need it if renewed escalation halts Israeli pipeline flows again.

A cold snap in Europe, an El Niño-related drought in Latin America or fresh Gulf disruption could push prices higher. The return of Middle Eastern LNG or mild weather in Europe and Asia could weigh on them. Rystad Energy advises market participants to plan for a broad range of outcomes rather than rely on one base case.