China natural gas destocking points to a rebound in LNG imports ahead of winter, and upside risks to TTF and JKM prices remain

Overview

This report discusses the impact of China's April natural gas data, high-frequency changes in LNG imports, the price spread between Asian and European gas, and global LNG supply maintenance on natural gas prices. Goldman Sachs notes that although China's natural gas demand was weak, inventories still drew down more than expected because LNG imports, domestic gas, and pipeline gas all came in below forecasts. This implies potential restocking demand ahead of winter could lift China's LNG imports. Meanwhile, if the disruption to energy flows through the Strait of Hormuz persists, competition between Europe and Asia for LNG supply will keep TTF and JKM prices facing upside risk.

Core views

There are three core views: first, weaker natural gas demand in China in April does not mean LNG import pressure has disappeared, because the year-over-year decline in inventories requires restocking later; second, the Asian LNG premium relative to European gas remains strong enough to attract more LNG cargoes toward Asia; third, the extra supply from some suppliers delaying or skipping maintenance is not sustainable and can only slow the decline in Northwest Europe LNG imports, not eliminate upside price risk.

Analysis framework

The report combines China's monthly apparent natural gas demand, industrial activity, LNG imports, domestic gas production, pipeline imports, and inventory changes to assess China's restocking needs. It also compares the JKM-TTF spread with the extra transportation cost of sending U.S. LNG to Asia versus Europe to evaluate the incentive for LNG cargo reallocation. In addition, it considers global LNG loadings and the trend in Northwest Europe imports to assess the direction of European gas price risk.

Methodology notes

• Supply-demand balanceNatural gas inventory and import balance analysis

  Inventory drawdowns drive future import demand

  Even if end-user demand is weak, inventories can still fall if import supply, domestic gas production, and pipeline imports come in below expectations; when restocking is needed before winter, LNG imports may rebound month over month.

• Cross-regional arbitrageJKM-TTF spread and transport cost comparison

  Asian premium guides LNG cargoes toward Asia

  When the JKM premium over TTF exceeds the incremental shipping cost of sending U.S. LNG to Asia rather than Europe, suppliers have a stronger incentive to shift cargoes from the Atlantic market to the Pacific market.

• Scenario analysisHormuz energy flow disruption scenario

  The duration of the geopolitical disruption affects European gas price upside risk

  Goldman Sachs uses the timing of the restoration of energy flows through Hormuz as a scenario variable; if restoration is delayed until late July rather than late June, the TTF price forecast could rise to 65 EUR/MWh in 3Q26 and 53 EUR/MWh in 4Q26.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• TTF

  The European gas benchmark, affected by lower LNG imports, Asian competition, and Hormuz risk

  Strengths

  If European imports decline or geopolitical disruptions persist, the price has strong upside elasticity.

  Weaknesses

  If global LNG supply keeps increasing due to maintenance delays, or if Hormuz flows recover quickly, price pressure may ease.

  Comparison

  Relative to JKM, TTF faces the risk of losing LNG supply to the Asian premium.

  Risks

  Persistent Hormuz disruption, declining European LNG imports, and intensified winter restocking competition.

• JKM

  The Asian LNG benchmark, influenced by China's restocking and Asian procurement demand

  Strengths

  China's year-over-year inventory decline and pre-winter restocking needs may support Asian LNG purchases.

  Weaknesses

  Weak Chinese industrial demand may limit demand elasticity.

  Comparison

  The JKM premium over TTF remains sufficient to cover the additional transportation cost of sending U.S. LNG to Asia.

  Risks

  Continued weakness in Chinese demand, narrowing Asian premium, and short-term supply increases from delayed maintenance.

• LNG

  A core tradable energy product connecting gas prices in China, Europe, Asia, and the U.S.

  Strengths

  Cross-regional arbitrage and winter restocking demand enhance trading value.

  Weaknesses

  Delayed maintenance by suppliers can temporarily increase loadings and ease supply-demand tightness.

  Comparison

  Compared with pipeline gas and domestic gas, LNG is more easily reallocated by regional price spreads and shipping costs.

  Risks

  Unsustainable maintenance schedules, geopolitical disruptions, regional import policies, and weather-driven demand volatility.

• China natural gas demand

  An important variable affecting Asian LNG demand and global cargo allocation

  Strengths

  The year-over-year decline in inventories indicates restocking import demand ahead of winter.

  Weaknesses

  April apparent demand was down slightly year over year, and industrial production and chemical activity were weak.

  Comparison

  Weak demand but tight inventory conditions make China's influence on the global LNG market more dependent on the pace of restocking.

  Risks

  Continued weakness in industrial activity, recovering domestic supply, and improving pipeline imports could reduce incremental LNG demand.

Key data

• China April apparent natural gas demand379 Bcm/yDown slightly year over year and about 8 Bcm/y below Goldman Sachs' expectation.
• China April industrial production growth4.1% yoyBelow 5.7% yoy in March; chemical and other gas-intensive industries were a key driver of weaker activity.
• Natural gas demand in the chemical industry40 Bcm/y or 29 mtpaIEA estimate of 2023 energy and feedstock gas consumption in the chemical sector.
• Goldman Sachs base TTF price forecast3Q26 44 EUR/MWh; 4Q26 40 EUR/MWhEquivalent to about $14.90/$13.65/mmBtu.
• TTF forecast under delayed Hormuz recovery scenario3Q26 65 EUR/MWh; 4Q26 53 EUR/MWhAssumes restoration of energy flows through Hormuz is delayed until late July rather than Goldman Sachs' base-case late-June timing.
• JKM-TTF spreadMay-20: $3.15/mmBtuThe chart shows this spread still exceeds the incremental transportation cost of sending U.S. LNG to Asia rather than Europe.
• Observed LNG loadings/imports in Europe and AsiaMay 15: Europe 55.12; Asia 48.81Chart notes indicate that both European and Asian cargo flows remain volatile, and regional competition remains a source of price risk.
• Global LNG loadingsWeek of 14-May to 20-May: 404.1 mtpaSome suppliers' delays or skipped maintenance improved global LNG loadings year over year.

Impact & implications

For energy markets, a rebound in China's restocking demand could increase Asian LNG procurement, drawing more supply away from Europe and reinforcing upside risks to TTF and JKM prices. For European and Asian gas consumers, price risk is tilted to the upside ahead of winter, and the report recommends hedging 2026-27 winter gas costs. For LNG traders and suppliers, if the Asian premium remains elevated, it will continue to support cargo reallocation toward the Pacific market.

Risks

• The restoration of energy flows through Hormuz may happen sooner than expected, which could reduce TTF and JKM upside risk.
• China's industrial activity and chemical gas demand may continue to weaken, which could lower LNG import demand.
• Global LNG suppliers may continue to delay or reduce maintenance, which could increase short-term supply and ease price pressure.
• The Asian premium over Europe may narrow, reducing the incentive to redirect LNG cargoes to Asia.
• European demand, inventories, or imports may come in stronger than expected, which could weaken support for TTF prices.

What to watch

• Whether China's LNG imports in May and later months continue to narrow the gap versus the same period last year.
• Whether China's natural gas inventories can return to year-over-year growth before winter.
• Whether the JKM-TTF spread remains above the incremental shipping cost of sending U.S. LNG to Asia rather than Europe.
• Whether suppliers in Malaysia, Oman, Angola, and elsewhere continue to delay or skip LNG maintenance.
• Whether Northwest Europe LNG imports continue to decline month over month or year over year.
• Whether the restoration of energy flows through Hormuz slips from Goldman Sachs' base-case late-June timing to late July.