East Med LNG hits eight-month high versus NWE on heatwaves, shipping constraints

LNG prices in the East Mediterranean have hit record high levels to the Northwest Europe LNG marker, supported by shipping constraints in the Red Sea and heatwaves in the Mediterranean region.

Platts, a part of S&P Global Commodity Insights, assessed the East Mediterranean marker for October at $13.266/MMBtu on Aug. 19, up 11.1 cents/MMBtu on the day and at a 30 cents/MMBtu premium to the NWE marker, up from the 27.5 cents/MMBtu premium seen on the previous day.

This put the East Med premium to NWE at the highest level recorded by Platts since it launched the East Mediterranean assessment on Dec. 20.

Heatwaves in the region have bolstered cooling demand and led to higher natural gas and LNG demand for power generation.

Furthermore, shipping constraints in the Red Sea have resulted in fewer cargoes from the Middle East entering the East Mediterranean region -- grouping Turkey, Greece, Croatia and Italy.

Imports of LNG into the East Med this month stood at 11 cargoes as of Aug. 20, according to Commodity Insights data.

Italy imported seven cargoes, with two heading to Turkey, and one each into Croatia and Greece.

"Will depend on how new capacities play out vs TTF price in the winter," one LNG trader said, with regard to East Med pricing. "[I] see East med as [a premium to] TTF all the way through winter as its most exposed area on Russian gas and not much via Suez."

The market continues to eye higher LNG prices for the fourth quarter of the year and into the first quarter of 2025, with the expiry of the Russia-Ukraine pipeline gas transit arrangements.

"We assume that Russian flows through Ukraine will not continue in 2025. This would remove approximately 33 MMcm/d of Russian pipeline supply to Europe," analysts at Commodity Insights said. "Europe has plenty of flexibility available in 2025 to cover for this lost supply, which will limit the impact on the TTF price, although it will lead to higher premiums for the Italian Virtual Exchange Point (PSV), Central European Gas Hub (CEGH) and Slovak Virtual Trading Point (VTP)."

For now, the region remains well-stocked to deal with domestic needs. Croatia and Italy's gas inventories stood at 82.63% and 91.19% full, respectively, according to the latest Aggregated Gas Storage Inventory data.