Shipping disruptions along the Suez Canal are tightening the JKM-TTF spread, as the dry up of LNG flows via the Red Sea is driving Middle Eastern LNG flows towards Asia away from Europe.
LNG flows via the Red Sea dried up gradually starting from mid-Dec and completely stopped by mid-Jan24.
While it does not lead to production curtailments, it increases the shipping time for Middle Eastern LNG to Europe by around 10 days.
Lengthier (and costlier) shipping routes to Europe are now incentivising higher LNG deliveries from the Middle East to Asia, putting additional downward pressure on JKM prices.
Consequently, the JKM-TTF spread tightened from around $1.7/mmbtu in Nov-Dec23 to just below $0.4/mmbtu since the start of 2024.
If LNG disruptions via Suez continue in the coming months, and Europe ends the winter season with a growing appetite for storage refill, we could potentially see TTF rising once again above JKM, to attract more LNG, including via costlier shipping routes.
Source: Greg Molnar