Prices in both Asia and Europe are currently trading in the mid-teens, with the Japan Korea Marker (JKM) more than $1.50/MMBtu above the Dutch Title Transfer Facility (TTF), the price marker for continental Europe. JKM has mostly traded above TTF since mid-May, with the spread widening in late summer and into fall. U.S. exports to Europe have fallen during this time, dropping from about 75% of total U.S. cargoes over the winter to about 55% in September. But the overall level of exports to Europe remains very strong and well above levels seen prior to Russia’s invasion of Ukraine in February 2022. U.S. LNG is highly destination flexible, with only about 20% of long-term LNG offtake contracts held by European utilities, 20% by Asian utilities and the remainder by traders and portfolio players.
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Upside Down - How Global Prices Steer U.S. LNG to Different Destinations
Even as winter starts to wind down, global natural gas prices remain elevated as rising tensions between Russia and the Western world have destabilized European energy markets and pushed LNG, and U.S. LNG in particular, to center stage. From a markets perspective, the story of the past year has been high global gas prices — a strong incentive for LNG producers to push production facilities to operate at peak capacity and produce additional cargoes. The tight market has also spurred demand for new long-term sales and purchase agreements (SPAs), creating momentum for a potential new wave of LNG development. But while gas prices in Europe and Asia have been elevated all year, they have not been elevated evenly. The Asia-Europe price spread has swung dramatically from favoring Asia last spring and summer to favoring Europe this winter, and U.S. export destinations have swung with it. Last summer, almost no destination-flexible LNG produced in the U.S. was landing in Europe and now Europe is consuming U.S. LNG at record levels. In today’s RBN blog, we look at how global price spreads impact U.S. LNG export destinations and what the strength in European demand means for the future of LNG development.
Music is Love - U.S. LNG, Underground Storage Help Save Europe From Another Tough Winter
With the war in Ukraine ongoing and Europe largely cut off or quitting Russian natural gas imports, many feared that global gas prices would skyrocket this winter, but prices have fizzled out instead and are at their lowest level since September 2021. That’s not to say gas prices are low, as they are still well above historic norms and high enough to incentivize LNG imports and the development of future LNG capacity. But despite losing its largest gas supplier, and prices running up in the months ahead of this winter, Europe appears to be in much better shape than it was last winter and gas prices have been relatively calm and on the downswing. So why is that? The difference between this winter and last largely boils down to storage inventories and the ability to attract LNG cargoes. In today’s RBN blog, we look at the European gas market, the impact of U.S. LNG supplies, and what it all means for developing LNG projects.
Shut Down, Part 2 - Global Market Impacts of the Freeport LNG Outage
Freeport LNG is expected to be offline for an extended period following last week’s explosion and fire at the export terminal, leaving the global gas market even more undersupplied than it already was. The outage cuts U.S. export capacity by about 2 Bcf/d at a time when Europe is still taking in huge volumes of LNG to offset declines in Russian supplies and bolster storage ahead of winter. This is all happening as another large exporting nation, Australia, is facing a critical winter energy crisis of its own and South American demand is headed toward its seasonal high, straining an already tight market. Today’s RBN blog continues our series about the ongoing Freeport outage, this time looking at the impact to the global gas and LNG markets.
