East Med LNG nears parity to TTF amid continued bid for supply security

LNG prices in the East Mediterranean have hit fresh record highs against the Dutch TTF hub, with prices nearly approaching parity.

Platts, part of S&P Global Commodity Insights, assessed the East Mediterranean at a discount of 2.5 cents/MMBtu to the April TTF on March 25, the narrowest discount since the assessment was launched on Dec. 20.

Prices have narrowed even further since the last update on March 12.

The East Mediterranean marker for April LNG was assessed at $9.016/MMBtu March 25, representing a 25 cents/MMBtu premium to the Northwest European LNG market. This is also a 30 cents/MMBtu premium to the Mediterranean marker.

The East Med market continues to battle lower volumes from the Middle East and is bidding higher to attract volumes from alternate supply sources.

The East Med -- comprising Turkey, Greece, and Croatia -- have been focusing on supply security in recent months despite milder temperatures subduing demand in the residential and commercial sectors.

Although the European market is preparing ahead of the injection season, traders are waiting for an uptick in demand in the East Med from power generation over the summer.

"Greece does not have storages, so injection season does not play a big part in changing the demand dynamics in the region," an LNG trader said. "Demand for gas will increase if Greece has a prolonged heat wave as this will increase the gas demand for power ... 68% of the consumption in Greece for gas is for power. Power demand is the most important driver for gas demand, especially in summers."

So far this year, LNG imports into the East Mediterranean have reached 4.62 million mt, according to analysts at S&P Global Commodity Insights.

The US has supplied around 53% of the total received in the East Mediterranean so far this year, while Algeria supplied 31% and Russia nearly 9%. Notably nearly 5% has arrived from Trinidad.

With Turkey and Greece's capacity outmatching their consumption, the market has also wondered who will become the new LNG gateway to the rest of Europe. With Europe and the Med shifting away from Russian gas and rapidly expanding their LNG infrastructure, the market has been looking at Turkey and Greece as potential hubs to feed Europe's growing LNG demand. Despite the expectations for a demand decline in the long term in Greece, this can help to support LNG imports in the near term.

"Given alternative supply is welcomed by the [Southeastern Europe] region, Greece faces steep competition from neighboring markets which also offer some combination of infrastructure and incremental supply, including Turkey, Croatia, Romania and potentially Italy," analysts at S&P Global said in a report.