U.S. vs. World Natural Gas Prices
While U.S. natural gas has rallied by a fair bit, it is ways away form world gas prices about 4x as high.

A chunk of this can be attributed to the Russian invasion of Ukraine; other factors are ESG and energy policy related at large.

Why such a divergence? Natural gas needs to liquified after being pulled out of the ground and transferred onto ships; it then needs to be re-gasified after having been unloaded. As a result, you create isolated markets where different hubs can trade at vastly different prices.

As U.S. export capacity increases, one would expect the spread to converge.
Rihard Jarc's avatar
Thx for putting this overview for some new investors! I am still shocked at how many investors do not know this and ask this question.
Andermatt Research's avatar
@rihardjarc For sure. And now that we've seen multi-year (18-20) contracts being signed by Japan, China as well as Europe, the market will inevitably find some form of convergence in the years to come. An important factor to keep in mind is the fact that further out the curve, the U.S. contracts are still trading sub $5.

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