Societe Generale analysts Michael Haigh, Ben Hoff and Jeremy Sellem describe how Winter storm Fern briefly pushed US gas futures above $7/MMBtu before prices fell below $3/MMBtu as storage stayed near the ten‑year average. They argue that softer carbon prices and a large global LNG supply expansion point to lower European gas prices and a tighter global linkage between US, European and Asian benchmarks.
LNG growth tightens global gas linkages
“Implications for natural gas? A softer carbon price reshapes the fuel stack. By lowering the cost of coal generation, cheaper carbon allows the same degree of gas‑to‑coal switching to occur at a lower gas price than before — pointing to a weaker outlook for European gas prices in the near term.”
“Looking further ahead, the pressure intensifies. With global LNG supply set to expand materially, we expect European gas prices to fall much further as the market works through a period of oversupply. In practical terms, this adjustment is likely to require a temporary closure of the US LNG export arbitrage, forcing prices lower in Europe until global balances are restored.”
“The surge in LNG supply fundamentally tightens the links between global gas markets. US, European and Asian (JKM) gas markets all sit in the same hemisphere, meaning they share broadly identical seasonal dynamics—winter heating demand, summer cooling demand, and shoulder‑month lulls. As a result, long‑term price correlations across these regions should remain structurally intact, without seasonal dislocations—and historically, they do.”
“Applying the same framework to forward curves as of February 14, 2026 indicates that, given current forward pricing, exchange rates, and arbitrage costs, LNG export profitability fades to near zero by 2027. This is strikingly similar to what the market was forecasting in 2023. In fact, over the past several years, the expected closure of the arbitrage has been remarkably stable, repeatedly projected to occur on roughly the same horizon.”
“The implication is not only a far more globally integrated gas market, but also a structurally dampened volatility profile. As LNG becomes increasingly mobile and responsive, global gas flows should resolve regional supply imbalances and storage shortfalls more quickly and efficiently, reducing the frequency and severity of extreme price spikes.”
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)