Asian LNG's Forward Curve Looks Too Cheap as EU Restocking Competes With Summer Demand
Morgan Stanley projects JKM at $25 per MMBtu in H2 2026, more than 30% above the forward curve, with European storage deficits adding a competing Atlantic bid.
JKM, the Northeast Asian spot LNG benchmark, edged up 0.71% to $21.26 per MMBtu on Monday (2026-08-10), recovering ground lost in the months since the supply shock that followed the February 28 (2026-02-28) closure of the Strait of Hormuz. The forward curve still prices the second half of 2026 well below current spot levels. Morgan Stanley's latest view runs the other way.4,6
In a note carried by Bloomberg on June 9 (2026-06-09), the investment bank forecast JKM reaching $25 per MMBtu in the third and fourth quarters of 2026 — upside of more than 30% to the forward curve. Rising temperatures are pushing electricity demand higher, the bank's analysts said, and utilities across Asia are underestimating their own fuel-price exposure through the peak cooling months.6
The prevailing bearish case rests on US supply growth. EIA data show marketed Lower 48 natural gas production averaged 117.2 Bcf/d in the first quarter of 2026 (1Q26), up 4% from the same period in 2025. The EIA forecasts L48 output to grow 3% over full-year 2026, led by the Permian Basin at an expected 29.2 Bcf/d, 6% above 2025 levels. Haynesville, most directly linked to Gulf Coast LNG export terminals, is forecast to grow 6% this year and 8% in 2027. On paper, the supply outlook is ample.1
Production growth and delivered Asian supply are not the same thing. NYMEX Henry Hub front-month sat at $2.79 per MMBtu on Monday (2026-08-10), cheap by historical standards, yet the spread to $21.26 JKM is wide enough to sustain near-maximum utilisation at US export terminals. Shipping times from Gulf Coast terminals to Northeast Asia run three weeks or more, and liquefaction loading slots constrain how quickly additional output reaches the market. The arb is open. The physical route is the constraint.1
Europe adds a competing claim on Atlantic LNG supply that summer demand models tend to underweight. EU-wide gas storage stood at 31.1% on February 20 (2026-02-20), according to AGSI+ data — 34.5% below the five-year average and 25.3% below the previous year's level at the same date. That degree of deficit going into the 2026 injection season requires aggressive European restocking. ICE Endex TTF front-month was at €55.50 per MWh on Monday (2026-08-10), elevated enough to sustain European purchasing power in the spot market. When TTF offers comparable economics to JKM after freight, Atlantic cargoes stay in Europe rather than diverting east.2
The March surge already showed how fast the LNG market reprices. When the Strait of Hormuz closed on February 28 (2026-02-28), roughly 20% of global LNG supply was disrupted, and Asian and European gas prices reached their highest level since the 2022/23 gas crisis, Global LNG Hub reported.4 The market then corrected sharply. JKM slid to its lowest point in nearly 19 months during the week of May 11 (2026-05-11) as more supply entered the market and Chinese spot demand — from the world's second-largest LNG buyer — stayed soft, traders said.5 The recovery since has been steady, with JKM now back above $21 per MMBtu.
One offset is Japanese inventory. METI data put Japan's LNG stocks for power generation at 2.00 million tonnes as of February 15 (2026-02-15), up from 1.89 million tonnes as of February 8 (2026-02-08), suggesting buyers used the May price weakness to rebuild. Japan enters peak summer with less urgent restocking need than it had in early February. But Japan is one buyer in a market where demand from South and Southeast Asia has broadened materially over recent years.2,3
EU storage injection progress through August and September is the data series most likely to resolve the bull-bear standoff. If AGSI+ weekly readings show European utilities falling short of the pace needed to approach seasonal norms before winter, spot buying intensifies, Atlantic cargoes divert less toward Asia, and the spread Morgan Stanley is calling moves into range. The JKM-TTF arb spread, updated weekly, will flag that shift before any headline does.