Reader JohnH * prices quote Politico
Source: Loureiro et al. (2022 )
* If you were questioning, yes, this is the very same JohnH who has difficulty identifying where mean genuine earnings information are located, what ONS information is reported, and doubts Ukrainian transfer to take Kherson.
Figure 1: US gas, USD/MMbtu, (blue, left scale), and TTF gas, EUR/MWh (green, right axis). Source: Tradingeconomics.com, accessed 11/29/2022.
Rates are estimated in various systems (Eur/MWh for TTF, USD/MMbtu for United States), so a direct comparison is not possible. Still one can see TTF prices are much below what they were previously in the year (although much greater than they were 2 years ago).
What about LNG. Here, as Ive noted, markets are segmented due to the fact that of capability for transportation and for conversion from liquid to gas form. EIA notes for the week ending 11/16:
International gas futures cost motions were blended this report week. According to Bloomberg Finance, L.P., weekly average futures costs for liquefied natural gas (LNG) cargoes in East Asia decreased 85 cents to a weekly average of $27.06/ MMBtu, and natural gas futures for delivery at the Title Transfer Facility (TTF) in the Netherlands, the most liquid gas market in Europe, increased 15 cents to a weekly average of $34.10/ MMBtu.
Is this to be expected (rather than whether this is a “excellent” or “reasonable” result)? I d say yes, provided what we understand about the market (see this post). The quote in the post is from Loureiro et al. (2022 ):
The most substantial finding is that no gas price convergence can be discovered outside Europe. This is despite the presence of episodes of partial merging that are identified in the literature, and replicated and described here. Notably, the results highly decline the postulate that increased LNG flows serve as a price-levelling arbitrage mechanism.
When one sees the relative magnitudes of flows a couple of years previously, one can see why cost equalization would be unlikely.
Here, as Ive kept in mind, markets are segmented since of capability for transportation and for conversion from liquid to gas type. I d state yes, provided what we know about the market (see this post). The quote in the post is from Loureiro et al. (2022 ):
The most substantial finding is that no gas price merging can be found outside Europe.
EU authorities attack Joe Biden over sky-high gas costs, weapons sales and trade as Vladimir Putins war threatens to ruin Western unity …” The reality is, if you look at it soberly, the nation that is most benefiting from this war is the U.S. since they are offering more gas and at greater prices, and due to the fact that they are offering more weapons,” one senior main informed POLITICO. ”
While the quote is taken verbatim from Politico, it is unclear to me that gas costs are sky-high in the European context. Here are data for US gas futures (blue line) vs. Dutch TFF futures (green line).