Energy traders are making a killing exporting US natural gas to Europe as prices there soar — with single shipments bringing in $200 million
LOIC VENANCE/Getty Images
- Energy companies and traders are raking in huge profits selling US natural gas to Europe as prices there skyrocket.
- The US is now sending 60% of its liquefied natural gas exports to Europe, up from less than 20% this time a year ago.
- "You're not talking about a margin. You're talking about a multiplier," one expert said. "All in all, it's insane."
Energy companies and traders are raking in huge profits selling US natural gas to Europe as prices on the continent skyrocket, with a single shipment netting around $200 million of profit, according to industry experts.
US exports of natural gas across the Atlantic have surged in 2022, as companies pounce on the huge earnings on offer while European governments facing a Russian supply squeeze desperately try to fill their storage tanks before winter.
"You're not talking about a margin. You're talking about a multiplier," Laurent Segalen, an energy investment banker who hosts the Redefining Energy podcast, said about the so-called arbitrage trade.
"All in all, it's insane," he told Insider.
Segalen said companies with gas to sell in the US can fill a large ship and send it across the Atlantic for around $60 million, with the cargo then fetching around $275 million in Europe.
Buyers who locked in deals to purchase US natural gas before the latest surge in European prices would also be making huge profits, according to Segalen.
Felix Booth, head of liquefied natural gas analysis at Vortexa, said he thought companies could be making around $150 million on each shipment.
"It's an incredible arbitrage that's open at the moment," he said. Booth said anyone holding natural gas in the hope that its price would rise has experienced "incredible" profits.
Large energy companies such as France's TotalEnergies as well as major trading houses such as Trafigura and Gunvor are some of the key players buying and selling US natural gas.
Booth said the companies are delivering what the continent needs as supplies run low. "It's not purely profiteering," he said. "There's a reason why the prices are so high."
Natural gas prices in Europe have spiraled upwards in 2022 as Russia has slashed exports of the fossil fuel to the continent. Last month Russia's Gazprom cut flows through the crucial Nord Stream 1 pipeline into Germany to just 20% of capacity.
European gas prices have risen around 200% in local currency terms over the last year. When converted into dollars, benchmark Dutch TTF natural gas futures prices stood at around $62 per metric million British thermal units (mmbtu) on Friday.
By contrast, US natural gas is far cheaper, given the country's plentiful supplies and its lower capacity for exports. US Henry Hub natural gas futures traded at around $8.70 per mmbtu Friday, even after rising sharply in recent months.
The gaping price difference has pushed major companies to ramp up exports from the US to Europe. Just shy of 60% of US liquefied natural gas exports — or 115 kilotons per day — went to Europe in August, according to commodities data company Vortexa. That's up from just 19% — or 35 kilotons a day — in the same month in 2021.
In June, US shipments supplied more gas to Europe than Russian pipeline flows, according to the International Energy Agency.
The surge in global energy prices has been extremely lucrative for the big energy firms. Gunvor, a major trading company headquartered in Switzerland, posted record profits in the first half of the year. Total's profit also hit a record, with the company's trading arm performing strongly.
Segalen and Booth both said they expect US natural gas exports to Europe to continue at similar levels as governments such as Germany scramble to secure supplies of the fossil fuel, which is vital for heating and industry.