What is driving record gas price differentials in Northwest Europe?

The risk to Russian gas supplies to Europe has been widely discussed since the invasion of Ukraine took place on 24th February. The response by EU countries is to quickly reduce reliance on Russian gas by nominating minimum contractual flows and introducing legislation to ensure storage minimum inventory fill by November this year. These combined actions have facilitated record volumes of LNG being delivered to the NW Europe market leading to changes in pipeline flow direction. ​ With Dutch and Belgian LNG terminals at capacity, record volumes of LNG delivered into the UK terminals has been re-exported to Germany via Belgium and the Netherlands, requiring maximum capacity to be used by BBL and IUK, the UK's two export pipelines to mainland Europe. Demand for capacity in these pipelines has been so high that large price differentials have developed. This Insight shows how the constrained flows have impacted prices whilst Germany and the Netherlands increase injection rates to storage.