European natural gas prices have reached a one-year high, creating a significant gap between them and U.S. gas prices. This price difference is expected to encourage U.S. LNG exporters to increase shipments to Europe, capitalizing on the higher prices.
Currently, the U.S. benchmark gas price, Henry Hub, is about 80% lower than the Dutch TTF Natural Gas Futures, Europe’s main trading benchmark. This growing price gap is expected to lead to more LNG deliveries to Europe this winter season.
Last week, European gas prices surged to their highest level since November 2023. The price jump came after Austria’s OMV warned of a potential halt in Russian pipeline gas supply, coupled with colder weather driving up demand for heating and electricity.
While Russia’s Gazprom did cut off gas supplies to OMV, flows to Austria have not completely stopped. The situation has added to uncertainty in the European gas market, which has been tense for weeks due to a combination of factors: the start of the winter heating season, low wind speeds in northwestern Europe, the ongoing dispute between OMV and Gazprom, and the expiration of the gas transit deal through Ukraine at the end of this year. Ukraine has stated it will not negotiate an extension of the deal with Russia.
As European gas prices continue to rise, the volume of natural gas flowing to U.S. LNG export terminals has surged, reaching a 10-month high earlier this week.
The price hike in Europe is also shifting LNG cargoes originally destined for Asia. At least 11 LNG shipments have been redirected to Europe in the past week alone, according to vessel-tracking data from Vortexa, as reported by Argus.
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