With ongoing global geopolitical risks persisting into the second quarter of the year, the East Mediterranean LNG marker has been tracking trends seen in the Italian gas hub with sources still seeing Italy and the East Med as the most favorable area to sell into versus the rest of Europe and the Med.
Not registered?
Receive daily email alerts, subscriber notes & personalize your experience.
Register NowHistorically, the Mediterranean region as a whole has been typically discounted to European prices. However, East Med marker versus Northwest Europe LNG differentials have tracked a similar trend to Italian PSV versus Dutch TTF differentials. With ongoing OLT maintenance in Italy, as well as reduced Qatari volumes to the country, Italian gas and East Med LNG prices have been heard at heightened premiums to their European counterparts.
Platts, part of S&P Global Commodity Insights, assessed the East Med marker for May LNG at $8.70/MMBtu on April 9, a 25 cents/MMBtu premium to the Northwest European LNG market.
At the same time, Platts assessed PSV -- the Italian gas hub price -- at $9.137/MMBtu, a 48.7 cents/MMBtu premium to the Dutch TTF gas hub price. Comparatively, East Med LNG was at a 5 cents/MMBtu premium to TTF.
East Med prices have remained at a premium to NWE since Jan. 17 on the back of ongoing shipping constraints in the Red Sea and reduced Middle Eastern volumes into the East Med and Italy. Similarly, PSV prices have remained at a premium to TTF since Jan. 5.
Currently, PSV stands at a 43.7 cents/MMBtu premium to levels seen in East Med, which could encourage healthy LNG imports in the coming months as the region stocks up for power generation.
Alternate supply pathways
The current shipping constraints in the Red Sea have impacted both Italy and the East Med with buyers in the region bidding higher to attract additional volumes from elsewhere. Despite the structurally weak market with weak residential and commercial consumption battling ample supply, buyers have been continuing to pay higher premiums to secure supply.
LNG imports in 2024 into Italy and the East Med -- Turkey, Greece, and Croatia -- stood at 8.39 million mt as of April 10, according to data from S&P Global LNG analytics. Of the 2024 total, 47% originated from the US followed by 25% from Algeria and 15% from Qatar.
This compared with the 9.96 million mt imported in 2023 over the same period -- Jan. 1 to April 10 -- with 32% coming from the US followed by around 19% from Algeria and 12% from Qatar. Notably, 10% arrived from Egypt.
Although Qatar volumes are still making their way into the region, Italy and the East Med have grown their reliance on alternate supply sources. Notably, imports into the region via the Suez Canal in 2024 so far stood at 370,000 mt versus the 1.61 million mt in 2023, over the same period.
The heating season has drawn to a close, however East Med players may continue to purchase spot volumes to replenish supply as they look to LNG, gas for power generation over the course of the summer.
"Pipeline imports form a stable 40% of the supply mix throughout the outlook, and markets looking for alternatives to Russian supply are signing new contracts with Norway, Azerbaijan and Turkey," S&P Global analysts said in a report. "With flexible long-term pipeline contracts with Russia largely gone, Europe will look to the significant new LNG supply coming online from 2025 onward to help meet demand."
Although the shipping constraints have kept premiums elevated versus the rest of Europe, sources are seeing differentials beginning to narrow with premiums coming in slightly due to dwindling demand and high inventories.
"The picture is pretty weak in Italy too at the moment," an LNG trader said. "The PSV-TTF is rather down these past days."