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Our October Chart of the Month considers strengthening trans-Atlantic gas correlation.

US and European winter gas prices, as measured by the TTF-HH spread, have historically been only loosely correlated. While US markets were driven by domestic demand, European ones were driven by coal-to-gas switching and carbon prices. The Dec 21 spread reached as much as 5.9 $/mmbtu in Q3 2018.

But that Dec 21 spread narrowed across 2019, reaching just 2 $/mmbtu in March as COVID-19 hit, and recovering to only 2.2 $/mmbtu today. Strong US LNG exports combined with lower shale production seem to be strengthening the relationship between European and US gas markets.

This is part of our regular ‘Chart of the Month’ insight series. Every month, CME publishes exclusive insight from gas market analysts at Timera Energy. Each chart looks at a lesser known aspect of the global natural gas markets, coupled with a sharp, succinct explanation. If you are a gas trader looking for an edge, sign up to download the latest chart.