European LNG cargo discount vs terminal capacity costs narrows since late April

The discount for landed cargoes of LNG into Europe versus the terminal capacity has narrowed substantially from two weeks earlier to around $2.80/MMBtu on May 9, easing the dislocation between the waterborne LNG and inland natural gas markets.

This has come even as differentials for European LNG cargoes have surged to new record high discounts versus the inland Dutch TTF gas hub.

The main driver: Multiple Atlantic-based traders reported that slots at LNG import terminals were opening up across Europe, including in Belgium and the UK, And some were said to be fetching significant sums. A Zeebrugge slot auction for June 7 that occurred May 6 was heard awarded at around $25 million to $27 million, according to several Europe-based traders. On May 9, another Zeebrugge slot for June 13 was heard awarded at around $20.75 million. Isle of Grain was also heard to be releasing slots.

"Wow," said one Europe-based trader.

Said another, "Slots are too expensive."

At an average price of around $24 million between the slot results that were reported, that translates to $7.20/MMBtu. Platts DES NWE, the delivered price of LNG into Northwest Europe, was assessed May 9 at a $10/MMBtu discount to the TTF front-month price. The $2.80/MMBtu differential between the LNG cargo market and inland gas market was narrower compared with $5.80/MMBtu in late April.

While the difference between LNG cargoes into Europe and natural gas in Europe has never solely been the logistical costs, the slot value versus the delivered LNG cost differential highlights the other supply and demand factors of the waterborne market. Weakness in non-TTF European gas hubs has also been at play recently.

The UK's NBP hub price for June was assessed at $15.697/MMBtu on May 9, while the Spanish PVB hub price was assessed at $21.972/MMBtu, S&P Global Commodity Insights data showed. Both were well below the $28.710/MMBtu that TTF June was assessed at May 9.