European LNG sellers look away from UK amid wide discounts

LNG sellers are disincentivized to send cargoes to the UK amid wide discounts for UK natural gas compared with other European hubs, according to traders.

The Platts Northwest Europe DES LNG marker was assessed at a $13.387/MMBtu premium over the UK NBP July 14. This represented the second widest spread on record, eclipsed only by the $16.776/MMBtu June 29, according to data from S&P Global Commodity Insights.

The NBP-TTF spread -- the difference between the UK and Dutch natural gas hub prices -- has also widened considerably. While the UK gas supply is more stable, Europe's reliance on Russia, and growing concerns that flows could be cut off entirely, have caused TTF to carry a significant premium.

"NBP is overloaded, so the price is crashing," a European LNG trader said.

Currently, there is a $23.287/MMBtu spread between NBP and TTF.

Sources said the difficulty for sellers is the lack of available slots in Continental Europe that can take LNG cargoes for regasification. The UK, along with the Iberian Peninsula, is one of the few destinations with available slots for spot cargoes. However, current NBP discounts have made the UK a much less attractive destination compared with other regional hubs.

"There are available slots still in the UK, but if you can divert, you do it," a second European trader said.

Demand from the UK will likely pick up from September, according to market sources, which may narrow the spreads and reincentivize the UK as a destination for LNG. A reduction in current LNG flows to the UK may also have a similar effect in causing the TTF-NBP spread to narrow.

"From September onward we will see more action from the UK, but there's no demand there in the summer," the second European LNG trader said.

The Platts Northwest Europe DES LNG marker was assessed at $41.358/MMBtu July 14, or a $9.90/MMBtu discount to the TTF natural gas hub. The widest discount to TTF on record was seen July 7 at $10.025/MMBtu, S&P Global data showed.