European natural gas prices have pulled away from US spot prices over recent months, driven by the conflict in Iran. With European storage near decade lows and a Russian LNG ban approaching, the gap between the two markets looks set to widen into winter.
The gap between US and European natural gas prices has widened over recent months, and the split traces back to the conflict in Iran. The European TTF spot price is nearly double its level of a year ago, while the US spot price is down about 18% over the same period, according to Seeking Alpha analyst Zoltan Ban.
European prices climb as supply tightens
European natural gas prices increased over the past few months, a move attributed to the conflict in Iran. Yet the reaction has stayed relatively contained, even as Middle East LNG exports were disrupted. Europe’s storage picture, meanwhile, has been deteriorating for well over a year.
European natural gas storage levels have been in steady decline relative to the five-year average since late 2024. Inventories are now trending near lows within the range of the past 10 years. The last time they sat this low for this point in the year was 2021 — the 2021-2022 price spike followed that shortfall.
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A Russian LNG ban looms
The market is set to tighten further at the start of next year. The EU ban on Russian LNG takes effect on January 1, 2027, removing supply that covers about 8% of Europe’s current natural gas demand. That timing leaves little room to rebuild stocks before the cold arrives.
Middle East supply offers no quick relief. A resumption of hostilities returned the region to a near-total blockade of the Strait of Hormuz, and Qatar has said before that its LNG facilities would need a few months to restart production once safe passage for tankers is assured. There are only two months left before cold spells reach parts of Europe.
North American producers gain ground
The divergence has fed through to companies on either side of the Atlantic. Reports cited by the author suggest US-based chemical companies are gaining an edge over peers in Europe and Asia.
Source: Seeking Alpha
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