US LNG exports to Europe are set to rise in the coming weeks after the price spread between domestic natural gas and Europe's main gas pricing hub hit one-year highs.
The price differential between US Henry Hub natural gas futures and the TTF gas trading facility in The Netherlands has widened by over 30% from the current 2024 average for delivery during the winter.
This is signalling a bumper profit potential for US LNG exporters, who are increasing the volumes of gas flows to their export facilities, according to a Reuters report.
Increased LNG shipments to Europe will trigger a revenue rise for the largest US LNG exporters, including Cheniere, TotalEnergies and Freeport LNG.
But higher demand for natural gas at LNG export terminals also raises the potential for a further hike in US domestic gas prices, which are already at their highest since January.
That means that while US LNG exporters have a good opportunity to boost revenues, they also face the risk of reviving inflation and triggering a backlash against the export of energy products needed for power domestic generation.
US natural gas prices are currently around 80% lower than TTF prices, giving LNG exporters the opportunity to profit from the wide price differential between the gas grades.
Thus far in 2024, Henry Hub gas futures have averaged around $8 per MMBtu less than TTF gas futures, according to LSEG.
That price differential, which is in US suppliers favour, has encouraged sustained LNG exports to Europe, which have reached around 82 mill cu m over the first 10 months of the year, according to Kpler.
However, an even wider price spread is projected through the coming winter which looks set to spur even larger shipments.
Key US & European natural gas price
forward markets from November through the end of March, 2025 indicate that the Henry Hub/TTF price spread is roughly $11 per MMBtu, an $3 increase over the 2024 average thus far, and a strong incentive for US exporters to boost shipments further.
US LNG exporters are keen to maintain their market share in Europe, as the cost of supplying European buyers is far lower, compared to Asian customers, due to far longer sailing times.
LSEG’s forward price data indicates that TTF prices are around $2 per MMBtu higher than LNG prices based off Brent-indexed LNG contracts, which utilise the price of Brent crude oil in formulating LNG prices.
The European price premium has already triggered traders to divert some cargoes from other markets, with the aim of capturing the higher prices available in Europe, compared to other regions.
