Overview
The spread between Henry Hub (NG) and the Dutch Title Transfer Facility (TTF) has become a key driver for transatlantic gas trade linkage. The spread represents the embedded optionality of U.S. LNG exports, the option to send the cargo to a destination offering the highest price. The inherent flexibility and destination options afforded by U.S. gas supply give traders the ability to re-route cargoes to the market offering the superior netback. This spread is sensitive to demand and supply shocks and geopolitical risk associated with each regional market. Traders utilize this spread to route cargoes toward the highest netback. Below is an example of how market participants can use this transatlantic spread (the Global Gas Arb) using CME Group instruments.
Approach
Locking in export arb margins
A U.S. Gulf Coast LNG exporter is planning to export LNG cargo in April 2026 and wants to hedge against geopolitical volatility in the Middle East. The trader seeks to lock the arbitrage margin regardless of whether the war escalates, further widening the spread, or if the conflict de-escalates, narrowing the spread and eliminating any directional price risk from these events. The trader executes the following strategy:
- Long leg: Henry Hub Natural Gas April 2026 @ $3.15 /MMBtu
- Short leg equivalent volume of TTF April 2026 futures @ €60.85 / MWh
- FX rate (CME EUR/USD): 1.157
- Converting TTF price from €/ MWh to $/MMBtu
- Conversion factor 1 MWh is equivalent to 3.41214 MMBtu
- TTF in USD/MMBtu: $20.63/MMBtu
- Current TTF NG spread: $17.48 /MMBtu
- Operational costs (OpEx):
- Liquefaction toll: $2.85/MMBtu
- Shipping and regasification: $1.80/MMBtu
- Total OpEx: $4.65/MMBtu
- Net margin current TTF NG spread - OpEx = $17.48-$4.65= $12.83 MMBtu
Locked-in economics
Physical net = (TTF-$1.81)-(NG+$2.85)
Futures P/L offsets to lock in margin = $12.83 MMBtu
Scenario 1: Geopolitical escalation
The Middle East war intensifies, causing a supply constriction in the Strait of Hormuz, a globally critical chokepoint through which approximately 20% of the world's LNG supply is transported.
| NG futures rise to | $4.25 MMBtu |
| TTF futures surge to | €82.00/Mwh ($27.80 MMBtu) |
| Futures gain on NG leg and losses on TTF net out and margin locked at | $12.83 MMBTU |
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Scenario 2: Geopolitical de-escalation
The geopolitical situation de-escalates and the spread collapses.
| NG futures decrease to | $3.00 MMBtu |
| TTF futures collapse | €48.00/Mwh ($16.300 MMBtu) |
| Futures losses in on NG leg are offset on gain on TTF net out and margin locked at | $12.83 MMbu |
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The hedging and trading opportunities for transatlantic crude oil trade are numerous. For more information about the products used above or other transatlantic arb products, please refer to the list below.
All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.
