Morgan Stanley projects LNG prices hitting 3-year highs

Morgan Stanley Sees LNG Prices Rising 30% in Second Half of 2026

Liquefied natural gas prices are poised to reach their highest level in more than three years, driven by swelling demand in Asia and a scramble to refill depleted European storage, according to a new forecast from Morgan Stanley.

Analysts Devin McDermott and Martijn Rats project the Asian LNG benchmark will climb to $25 per million British thermal units during the third and fourth quarters of 2026, representing upside of more than 30% relative to the forward curve, according to a Bloomberg report published on Monday. That price level has not been seen since early 2023, when Europe’s push to replace Russian pipeline gas drove global LNG costs sharply higher.indexbox

Demand Pressures Mount

Morgan Stanley cited forecasts for modestly hotter weather across Asia in June and July as a near-term consumption driver, alongside rising gas demand in India and China. In Europe, the need to replenish inventories that remain well below year-ago levels adds further upward pressure. European gas storage entered the 2026 injection season at its lowest level since 2018, according to Columbia University’s Center on Global Energy Policy. Storage draws over the winter ran roughly 17% above the five-year average amid colder weather and stronger gas burn in the power sector.yahoo

Supply Disruption Lingers

The prolonged near-closure of the Strait of Hormuz — a consequence of the broader Middle East conflict — has removed roughly one-fifth of global LNG supply from Persian Gulf producers Qatar and the United Arab Emirates. CNBC reported last week that the standoff has reshaped the energy security debate, exposing vulnerabilities in fossil fuel supply chains.globallnghub

Morgan Stanley noted that increased output from the United States and other regions has partly offset the Persian Gulf shortfall but has not been sufficient to eliminate the deficit entirely. The bank estimates a global LNG supply gap of approximately 15 million tons — about 4% of worldwide supply — for 2026.indexbox

Prices Expected to Stay Elevated

The bank said prices are projected to rise even if a near-term resolution to the Middle East conflict materializes, given the structural tightness in the market. Europe faces an especially difficult restocking challenge: the European Commission has warned that energy prices will remain elevated for months regardless of diplomatic developments around the Strait of Hormuz.investing