TTF gas prices surged sharply in January as tightening European fundamentals widened the premium over Asian spot LNG benchmarks, underscoring Europe’s sensitivity to weather, storage levels and short-term market signals.
TTF’s premium over JKM widened to its highest level since Apr23, driven by stronger European gas demand and dwindling storage levels.
TTF month-ahead prices surged by nearly 50% since the start of January amid the benchmark’s wildest bull run since the 2022 gas crisis. Colder weather together with slower nuclear power output boosted European gas demand by more than 8%, while EU storage levels are now trending below their 5-year average.
JKM followed TTF, although at a more tepid pace, climbing by around 20% since the beginning of the year. While the region is also facing a severe cold spell and has very limited underground storage capacity, Asian spot LNG prices displayed somewhat calmer patterns than TTF.
One key difference between the northeast Asian and northwest European markets is the availability of coal-based generation at scale in Asia, which may have softened spot LNG price movements through coal-to-gas switching optionality across key regional markets.
The widening TTF premium over JKM may also indicate that Europe is willing to ramp up LNG imports over the remainder of the winter to moderate storage withdrawals, keeping the region on track for another record-breaking year of LNG imports.
What is your view? How will the global LNG market evolve this year? Will we see stronger competition between Asian and European markets for flexible LNG? And how will the spread evolve?
Source: Greg Molnar (LinkedIn)
