Natural gas prices have recovered significantly after a steep correction earlier this year, with market conditions turning favourable as inventory balances tighten, export activity rises and seasonal electricity consumption picks up, according to a report by Motilal Oswal Financial Services Ltd.
Henry Hub prices, which fell from a January 2026 high of $7.72/Million British Thermal Units (MMBtu) to $2.77/Million British Thermal Units (MMBtu) in April, have since moved back above the $3/MMBtu level. The turnaround has been aided by lower-than-expected storage injections, stronger consumption from the power sector and continued expansion of US liquefied natural gas (LNG) infrastructure, the report stated.
It highlighted that recent inventory data points to a gradual rebalancing of the market. 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.
Warmer weather across key regions has also lifted electricity usage, resulting in higher gas consumption by power generators. As cooling requirements increase during the summer months, utilities are drawing more fuel to meet rising energy needs.
Navneet Damani, Head of Research – Commodities, 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. Alongside these developments, emerging requirements from data centres are creating an additional source of consumption. Collectively, these factors are contributing to a more favourable medium-term environment for the commodity,” Damani said.
Another major factor influencing market sentiment is the continued expansion of US LNG capacity. 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.
Global market conditions remain constructive. Price premiums in Europe and Asia continue to encourage US cargoes, while ongoing disruptions to international trade routes have reinforced the attractiveness of American LNG in overseas markets.
Furthermore, the report noted that beyond seasonal and export-led drivers, the rapid build-out of AI-focused data centres is emerging as a significant long-term consumption trend. Increasing investment in gas-fired power generation to ensure reliable electricity supply is adding a new dimension to future market requirements.
