US gas futures briefly rose above $7\/MMBtu during Winter storm Fern, then fell below $3\/MMBtu. Storage levels stayed near the ten-year average.<\/p>\n
Lower carbon prices reduce the cost of coal power generation. This means the same level of gas-to-coal switching can happen at a lower gas price, pointing to lower European gas prices in the near term.<\/p>\n
Global LNG supply is expected to expand, which can create a period of oversupply. This may lead to lower European gas prices until global supply and demand rebalance, including a temporary closure of the US LNG export arbitrage.<\/p>\n
US, European and Asian (JKM) gas benchmarks are described as sharing similar seasonal demand patterns, such as winter heating and summer cooling. This supports continued long-term price correlation across these regions.<\/p>\n
Using forward curves dated 14 February 2026, LNG export profitability is shown fading to near zero by 2027 under current forward prices, exchange rates and arbitrage costs. This was also forecast in 2023, with arbitrage closure repeatedly projected on a similar timeline.<\/p>\n
We have seen US natural gas futures fall back below $3\/MMBtu after a brief winter spike, which is no surprise given the current market fundamentals. The latest Energy Information Administration (EIA) report shows working gas in storage at 2,150 Bcf, which is right in line with the five-year average for mid-February. This ample supply suggests that any weather-related price rallies will likely be short-lived and could present selling opportunities.<\/p>\n
The outlook for European prices looks even weaker, pressured by both a flood of new global LNG supply and softer carbon prices. With European Union Allowances (EUAs) trading near \u20ac45 per tonne, down significantly from peaks we saw in previous years, coal-fired power generation becomes more economical. This reduces the demand for natural gas in the power sector, placing a ceiling on any potential price increases for TTF contracts.<\/p>\n
This wave of LNG is tightening the link between US, European, and Asian gas markets more than ever before. We should expect price correlations between Henry Hub, TTF, and JKM benchmarks to strengthen, especially as massive new export capacity from projects like Qatar\u2019s North Field East comes online later this year. Traders should therefore watch inter-basin spreads, as the extreme price dislocations we saw back in 2022 are becoming structurally less likely.<\/p>\n
Looking at the forward curves, the arbitrage for sending US LNG to Europe is forecast to essentially close by 2027. This suggests that longer-dated European gas contracts may be overvalued relative to their US counterparts. Establishing bearish positions on calendar 2027 TTF futures or selling call options on that tenor could be a viable strategy to capitalize on this expected price convergence.<\/p>\n
Ultimately, this points to a market with structurally lower volatility in the coming years. As LNG flows become more efficient at balancing regional markets, the wild price swings of the past should become less frequent. This environment favors strategies that profit from range-bound price action or declining implied volatility, such as selling strangles or investing in calendar spreads.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Winter volatility faded; storage steady. Cheaper carbon and rising LNG supply may depress European gas prices.<\/p>\n","protected":false},"author":62,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-41998","post","type-post","status-publish","format-standard","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/41998","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=41998"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/41998\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=41998"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=41998"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=41998"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}