LNG price benchmarks: TTF, JKM, Henry Hub
Natural gas is priced at different benchmarks depending on the region and whether it is traded as pipeline gas or LNG (liquefied natural gas, cooled to −162°C for shipping). The three key global benchmarks:
| Benchmark | Region | Physical basis | 2024 avg (approx.) |
|---|---|---|---|
| TTF (Title Transfer Facility) | Europe | Dutch virtual trading hub; pipeline + LNG | EUR 35–45/MWh (~USD 10–13/MMBtu) |
| JKM (Japan-Korea Marker) | East Asia | Delivered spot LNG price to Japan/Korea/China | ~USD 12–15/MMBtu |
| Henry Hub | USA | Pipeline gas, Louisiana; US domestic benchmark | ~USD 2–3/MMBtu |
The massive spread between Henry Hub (~USD 2–3) and TTF/JKM (~USD 10–15) is what drives the economics of US LNG exports: US producers liquefy gas at Henry Hub prices, add liquefaction (~USD 2–3/MMBtu), shipping (~USD 1–3/MMBtu), and regasification (~USD 0.5–1/MMBtu), and still profit significantly selling at European or Asian prices. The structural spread — driven by the US's enormous shale gas production advantage — is why Gastech 2024 in Houston (discussed at our Gastech 2024 event overview) was dominated by long-term US LNG contract discussions. The ICE TTF futures are the primary hedging tool for European gas consumers.
The 2022 price spike: causes and mechanics
The 2022 European gas crisis was the most acute energy shock since the 1970s oil embargoes. Its root cause was structural over-dependence on Russian pipeline gas — approximately 40% of EU gas imports pre-invasion — without sufficient alternative supply or storage to buffer a rapid loss of that supply.
The sequence:
- Pre-invasion tightening (2021): Post-COVID demand recovery collided with low European storage and reduced Russian flows. TTF rose from EUR 14/MWh in January 2021 to EUR 90/MWh by December 2021 — before the invasion.
- Invasion (Feb 2022): Markets immediately priced in supply risk. TTF jumped from EUR 90 to EUR 130/MWh in days.
- Nord Stream throttling (Jun–Aug 2022): Russia reduced Nordstream 1 flows to 20% capacity, citing "maintenance" issues. Spot prices reached EUR 350/MWh in August 2022.
- Emergency response (2022–23): EU emergency storage filling mandates, demand reduction regulations, rapid LNG import terminal development (Germany built 3 FSRUs in 6 months), and temperature management reduced demand. Storage refilled faster than expected.
- Normalisation (2023–24): TTF fell to EUR 25–45/MWh by 2024 as US LNG exports grew and European demand fell 15–20% through efficiency, fuel switching, and industrial contraction.
Europe vs Asia: competing for the same cargoes
LNG is a global commodity. The same cargo that loads in Sabine Pass, Louisiana can go to Japan, the Netherlands, or South Korea depending on which buyer offers the highest delivered price. This arbitrage connection means European and Asian gas prices are linked through LNG flows — a tight market in Asia pushes up European import costs, and vice versa.
The Asia premium (JKM over TTF, or vice versa) reflects seasonal demand differences, storage positions, and geopolitical supply constraints. In winter 2022, Europe outbid Asia for cargoes by paying EUR 350/MWh equivalent — far above what most long-term Asian contracts stipulated. By 2024, the market rebalanced as:
- US LNG export capacity grew from ~12 bcf/day to ~14 bcf/day (and continues expanding)
- Qatar's NFE (North Field Expansion) added ~32 Mtpa of new LNG production capacity
- European demand fell structurally
- China's LNG demand grew more slowly than projected as economic growth softened
The IEA Gas Market Report Q4 2024 projects global LNG supply surplus through 2025–2026 as new capacity comes online, keeping TTF and JKM in the USD 10–15/MMBtu range barring a major demand or supply shock. This context is directly relevant to the contract discussions at Gastech 2024 and the supply security debates at SIEW 2024.
How gas prices connect to fuel prices
The link between TTF and pump prices for petrol and diesel is indirect but economically real through four channels:
- Refinery operating costs: Natural gas is used as energy input in crude oil refining — for process heat, hydrogen production (hydroprocessing), and steam. High gas prices increase refinery opex, widening the crack spread needed for refineries to break even and adding margin to wholesale fuel prices.
- Heating oil substitution: When gas prices spike, households and businesses switch to heating oil (a light fuel oil similar to diesel). This added demand pushes up diesel and heating oil prices even if crude oil is unchanged. The 2022 European gas crisis drove diesel crack spreads to record levels above USD 60/bbl (vs a normal USD 15–25/bbl).
- Electricity price effect on EVs: High gas prices inflate electricity generation costs in gas-dependent power markets. This narrows the running cost advantage of EVs versus petrol vehicles, temporarily reducing the economic incentive to switch. In 2022, some European EV owners found their electricity bill for equivalent driving had doubled, though still below petrol costs in most markets.
- Fertiliser and biofuel feedstock: Natural gas is the primary feedstock for nitrogen fertiliser (via ammonia synthesis). High gas prices increase fertiliser costs, which raise agricultural commodity prices. Higher crop prices reduce the economic attractiveness of crop-based biofuels (rapeseed, corn ethanol), potentially tightening biofuel supply and supporting petrol prices.
For a quantification of how these relationships flow through to the consumer pump price, the rule of thumb is that a EUR 50/MWh sustained increase in TTF (roughly EUR 1.50/MMBtu higher than normal) adds approximately EUR 0.02–0.04/litre to petrol pump prices via refinery cost effects in gas-dependent European markets.
2024 and beyond: lower but structurally higher
European TTF in 2024 averaged approximately EUR 35–45/MWh — significantly below the 2022 peak but roughly 3–4x the pre-2021 norm of EUR 10–15/MWh. This "new normal" range reflects:
- Permanent loss of cheap Russian gas: Russia-EU pipeline trade went from ~130 bcm/year to near-zero. The physical infrastructure for Russian gas (Nordstream, Yamal-Europe) cannot easily be restored. Europe's gas will be structurally more expensive than it was when Russian pipeline gas set the marginal price.
- LNG import infrastructure investment: Germany, the Netherlands, Finland, Estonia, and others invested in floating regasification units (FSRUs) and terminal expansions in 2022–23. These have EUR 0.5–1.0/MWh regasification cost impact and represent sunk costs that require utilisation.
- Tight winter margins: European storage capacity is finite. A colder-than-average winter combined with an Asian demand spike could recreate 2022-style tightness. The structural vulnerability is smaller than 2021 but not eliminated.
For European petrol and diesel consumers, a structurally higher gas price floor means a persistent increment to fuel costs via the refinery opex channel — not as dramatic as 2022 but not returning to pre-2021 levels either. This is part of the structural context behind the EU fuel tax harmonisation debates and the energy security discussions at the IEA Ministerial 2024.
FAQ
What is TTF and why does it matter for European fuel prices?
TTF is the Dutch virtual natural gas trading hub and Europe's primary gas price benchmark. High TTF prices increase electricity generation costs, refinery operating costs, and create heating oil demand substitution effects — all of which add margin to petrol and diesel pump prices in gas-dependent European markets.
Why did European gas prices reach EUR 350/MWh in 2022?
Russia supplied ~40% of EU gas pre-invasion. As pipeline flows were cut, Europe needed to replace 80–100 bcm at short notice by buying spot LNG cargoes competing with Asian buyers. Combined with low storage and surging demand, TTF hit EUR 350/MWh in August 2022 — ~25x the pre-2021 norm.
How does European LNG compete with Asian buyers?
LNG cargoes can be redirected to whichever market pays more. The JKM-TTF price difference determines cargo flow direction. In 2022, Europe outbid Asia to attract cargoes. By 2024, the market rebalanced as US LNG capacity grew, Qatar NFE expanded supply, and European demand fell structurally.
How does gas price volatility affect petrol and diesel prices?
Four channels: (1) refinery operating cost increases via gas as process energy; (2) heating oil demand substitution during gas spikes widens diesel crack spreads; (3) high electricity prices narrow EV vs petrol running cost advantage; (4) high fertiliser costs from expensive gas can affect biofuel feedstock prices. A EUR 50/MWh TTF increase adds ~EUR 0.02–0.04/litre to European pump prices.