European LNG hits record wide discount to natural gas

European LNG has reached new record discounts to the Dutch TTF gas hub front-month price, amid tepid Asian demand and a steady supply of cargoes into Europe, where there is a limited amount of available regasification slots for prompt deliveries.

Platts DES Northwest Europe for September, the new front-month, and DES Mediterranean marker were both assessed at $35.345/MMBtu July 18, versus a September TTF assessed price of $47.345/MMBtu. NWE's $12/MMBtu discount to TTF exceeded the July 15 assessed discount of $11.95/MMBtu, which was the widest mark since July 7.

The recent moves followed a fall in the Asia-Pacific spot market due to low regional spot liquidity and indications of weaker downstream buying in northeast Asia. This points to a weaker pull for cargoes to the Far East.

Despite the lack of pipeline gas flowing into Europe, the LNG market has been well supplied by contractual volumes, indicating a decoupling between the LNG and wider natural gas market.

"Europe is saying that it's short of gas, but we are oversupplied with LNG," a European trader said.

According to the trader, LNG continues to arrive in Western Europe, but the focus of demand is the East, traditionally dependent on Russian flows through Nord Stream I. The network also lacks the compressors to move regasified LNG to the East, leading to a decoupling in the market.

"The gas is not in the right place," the trader added.

Regas capacity

Available regasification slots are also in short supply, putting pressure on spot demand. Sources said the difficulty for sellers is the lack of available slots in Continental Europe that can take LNG cargoes for regasification. Previous favorable spreads resulted in regasification slots being bought up in advance, with limited availability on the prompt.

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.

The spread between TTF and UK NBP was assessed at $23.4310/MMBtu July 15, the widest on record.

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