Natural Gas Prices Rebound on Lower Storage, Higher Exports, and Data Center Demand

New Delhi: Natural gas prices have recovered significantly after a sharp correction earlier this year, supported by tightening inventories, rising LNG exports and stronger seasonal power demand, according to a quarterly report by Motilal Oswal Financial Services Ltd (MOFSL).

The report said Henry Hub natural gas prices, which fell from a January 2026 high of USD 7.72 per Million British Thermal Units (MMBtu) to USD 2.77 per MMBtu in April, have since climbed back above the USD 3 per MMBtu level.

According to the MOFSL quarterly report, the recovery has been driven by lower-than-expected storage injections, higher consumption from the power sector and continued expansion of US liquefied natural gas (LNG) infrastructure.

The report noted that recent inventory data points to a gradual rebalancing of the market, with supply overhang concerns easing in recent months.

"Storage additions have remained below expectations for three consecutive weeks, while the year-on-year surplus has contracted substantially from levels seen in April. This indicates that supply overhang concerns have eased considerably in recent months," the report said.

The report added that European storage trends also point to tightening gas market balances, supporting a more constructive outlook for prices.

Seasonal demand has also contributed to the recovery, with warmer weather increasing electricity consumption and boosting gas use by power generators.

"As cooling requirements increase during the summer months, utilities are drawing more fuel to meet rising energy needs," the report said.

The report further highlighted the growing role of LNG exports in shaping market dynamics. It said export volumes are expected to rise through 2026 as new LNG facilities ramp up operations and additional liquefaction trains come online.

"Export volumes are projected to rise during 2026 as new facilities ramp up operations and additional liquefaction trains come online. The growing linkage between domestic production and overseas markets is expected to play a larger role in balancing supply," the report said.

According to the report, global market conditions remain supportive for US LNG shipments as higher gas prices in Europe and Asia continue to encourage exports.

"Higher international gas prices compared with Henry Hub continue to support the economics of US LNG exports," it said.

The report also pointed to the rapid expansion of AI-focused data centres as an emerging long-term source of natural gas demand, with increasing investment in gas-fired power generation to ensure reliable electricity supply.

Commenting on the findings, Navneet Damani, Head of Research - Commodities at Motilal Oswal Financial Services Ltd, said, "The natural gas market is witnessing a meaningful shift after the sharp decline seen earlier this year. Inventory balances are tightening, export infrastructure continues to expand and power-sector consumption is gaining momentum with the onset of summer."

He added that "emerging requirements from data centres are creating an additional source of consumption."