Market data released on September 2 showed notable gains across key natural gas benchmarks, with the Dutch TTF October contract rising 1.61% to 73.435 euros per megawatt-hour. The JKM October contract climbed 1.63% to 24.490 dollars per million British thermal units, while the NYMEX October Henry Hub futures advanced 1.80% to 2.999 dollars per million British thermal units.

Japan Petroleum Exploration Co. has entered into a long-term liquefied natural gas supply agreement with Brunei LNG Sdn Bhd to help balance supply shortfalls. A company spokesperson confirmed on September 2 that shipping disruptions in the Strait of Hormuz have prompted Japex to secure LNG volumes under its term contracts, noting that such disruptions could persist beyond the 2027-28 fiscal year ending in March. However, the spokesperson declined to disclose specific contract terms or volumes.

LNG freight rates in the Pacific Basin declined during the final week of August, narrowing the substantial premium over the weaker Atlantic market. Market participants observed that physical cargo flows are increasingly redirecting toward Europe rather than Asia, as European buyers rush to replenish inventories ahead of winter demand. Multiple shipbroking sources indicated the freight market remains fundamentally imbalanced, with excessive vessel capacity chasing limited cargo volumes.

Japan's Ministry of Economy, Trade and Industry reported on September 2 that LNG inventories held by major Japanese power utilities increased 2.1% week-on-week to 2.42 million metric tons as of August 30, marking the highest level in six weeks. A ministry official attributed the build-up to higher-than-expected LNG vessel arrivals during the week, despite rising gas consumption.

Where the market stands now

In the Asian and European markets, ongoing geopolitical conflicts have left little room for improvement expectations. Despite inventory replenishment pressures, Asia's fundamentally balanced market has maintained stable regional price differentials while following Europe's upward trajectory. Price stabilization in the longer term requires observable signals from Middle East exports, while near-term attention centers on policy responses or demand reactions to elevated prices. The market is expected to maintain a relatively strong performance.

In the US market, production remains at elevated levels, but early September heatwaves have bolstered demand expectations, creating a range-bound yet firm tone. The sustainability of the recent rally toward the 3-dollar level for front-month contracts warrants close observation.

Trading strategy considerations

Europe's inventory replenishment challenges have shown no meaningful improvement, supporting continued holding of long positions in TTF contracts initiated earlier. Asia's procurement urgency remains weaker compared to Europe, suggesting potential for further widening of the TTF-JKM price spread.

Key risks to monitor

Upside risks include strengthened autumn inventory replenishment demand in Asia and potential damage to Middle East production and export facilities from intensified conflicts. Downside risks encompass rapid de-escalation of Middle East tensions and macroeconomic weakness suppressing demand.