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As Europe’s benchmark natural gas prices have hit a one-year high, their premium over with the U.S. benchmark gas price has widened well above 2024 averages, signaling that U.S. LNG exporters will likely further boost deliveries to Europe to take advantage of the widening spread.
Currently, the price of the U.S. benchmark, Henry Hub, is about 80% lower compared to the Dutch TTF Natural Gas Futures, the benchmark for Europe’s gas trading, according to data cited by Reuters columnist Gavin Maguire.
The wide premium of European prices against U.S. prices is set to incentivize LNG exporters to ship more cargoes to Europe this winter season.
Last week, the European benchmark price surged to the highest since November 2023 as Austria’s OMV warned of a potential halt to Russian pipeline gas supply and as colder weather drives stronger demand for heating and electricity.
Russia’s Gazprom did indeed cut off supply to OMV, but Russian gas flows to Austria haven’t fallen off a cliff, yet.
The European natural gas market has been on edge for weeks with the start of the winter heating season, a massive lull in wind speeds in northwestern Europe, the OMV-Gazprom dispute, and the end of the gas transit deal via Ukraine which expires on December 31, 2024. Ukraine has said that it would not pursue talks about renewing the agreement with Russia.
As European prices rise, the volume of natural gas flowing to the seven U.S. LNG export plants was on track to hit a 10-month high earlier this week.
The higher European prices are also diverting LNG cargoes initially bound for Asia, as Europe currently commands a premium in prices.
In the past week alone, at least 11 cargoes diverted from either Asia or Egypt to Europe, Argus reported earlier this week, citing vessel-tracking data from Vortexa.
