Spain emerges as premium gas market on tight LNG availability, heat wave demand

Heat wave conditions across parts of Europe have lifted Spanish gas prices to the highest premiums to their Dutch TTF equivalents in years, with a globally tight LNG market leaving Spain increasingly reliant on stronger pricing to attract cargoes.

"[The] market is globally very tight on the LNG side. So either Spain becomes premium or no cargoes will come here," a Spain-based gas trader said.

Temperatures across Spain have run well above seasonal norms, climbing as much as 5.21 degrees Celsius above the five-year average on June 22, according to CustomWeather data. The heat has driven a sharp reversal in storage behavior: Gas Infrastructure Europe data showed withdrawals from Spanish stocks over 14 consecutive days averaged 35.01 gigawatt-hour/day between July 2-15, bucking the usual summer injection pattern.

As a result, Spanish stocks stood at 72.58% fullness, or 26.01 terawatt-hour, by the end of gas day July 15 -- the only EU market to withdraw on the day. By contrast, the wider EU continued to inject, albeit at a slower pace than in previous seasons. EU gas stocks were 53% full as of July 15, according to the latest data from Gas Infrastructure Europe, more than 10 percentage points below the level recorded on the same day a year earlier.

The tightening balance has widened Spain's premium across the curve. Platts, part of S&P Global Energy, assessed the Spanish PVB day-ahead contract at Eur55.945/megawatt-hour July 15, a Eur3.170/MWh premium to its Dutch TTF counterpart and the highest since October 5, 2023.

Platts assessed the PVB front-month contract at Eur54.980/MWh July 16, a 58.5 euro cent/MWh premium to the TTF equivalent — the widest spread between the two instruments since July 31, 2024.

Gas gains have had a tangible impact on Spanish power prices, with the day-ahead product settling at Eur138.11/MWh for delivery on July 15, marking the strongest price seen since February 2025.

So far this July, gas has accounted for 23% of the Spanish electricity mix, up two percentage points year over year.

In this time, the Platts PVB day-ahead assessment has strengthened by over Eur16/MWh (48%), averaging at just over Eur50/MWh this month so far, which has helped firm Spanish spot power costs by 38% year over year.

On the LNG side, Enagas data showed Spanish LNG in tank inventories at 48% full as of July 16, down 27 percentage points month over month and 16 percentage points year over year. Disruptions to global LNG supply stemming from the ongoing US-Iran conflict have further tightened balances.

Platts assessed the Spanish TVB August instrument at Eur54.615/MWh July 16, at a 13.5 euro cent/MWh discount to the TTF August contract and the highest price since late March.

Import volumes have trended lower since the start of the year. S&P Global Energy CERA data showed Spain imported 1.18 billion cubic meters of gas in June, virtually unchanged month over month but 26% below the 1.58 Bcm recorded a year earlier.

Robust cooling demand has underpinned domestic consumption. Spanish gas for power burn averaged 33.2 million cubic meters/day over July 1-14, up from 31 MMcm/d in the same period last year and well above the 25.7 MMcm/d June average, according to CERA data.

Cross-border flows have also thinned. Spain exported just 1.9 MMcm of gas to France in the first two weeks of July, down sharply from the 31.3 MMcm sent over June 1-14, as domestic demand absorbed available supply.