Reading the gas and LNG market: the three benchmarks and inter-basin arbitrage

Gas reads as the mirror image of oil. Oil has a world price, give or take a few quality differentials, because a barrel travels easily anywhere. Gas stays long a prisoner of its pipes: without a pipeline, it must be liquefied to be moved, a costly operation that fragments the market into three great regions with distinct prices. To understand gas is first to accept that it has no single price, but three, and that the essential plays out in the spread between them. This guide lays out the benchmarks, the LNG chain, the units, the arbitrage and the signals, with the 2026 Hormuz crisis as the thread, alongside our oil market guide.

Three benchmarks, not one price

The world gas market is organised around three references. Henry Hub is a physical delivery point in Louisiana, the benchmark for US gas and the base of most US LNG export contracts. TTF, the Title Transfer Facility, is a Dutch virtual trading point that has become Europe’s reference, quoted in euros per megawatt-hour. JKM, the Japan-Korea Marker published by S&P Global Platts, is the benchmark for spot LNG delivered to Northeast Asia.

These three prices do not align, and their hierarchy has a logic. Henry Hub is structurally the cheapest, because the United States produces abundant gas it long struggled to export. TTF and JKM trade higher, because they embed the cost of bringing liquefied gas to them. According to the LNG association, TTF and JKM sustain a premium of $5 to $10 per MMBtu over Henry Hub, precisely to cover liquefaction, shipping and the relative scarcity of supply in Asia and Europe.

The LNG chain: what connects the basins

What turns three siloed markets into a connected system is liquefied natural gas, LNG. The principle has three steps. The gas is cooled to about −162°C to liquefy it, which cuts its volume by more than six hundred and makes it transportable by carrier. It is shipped by sea toward the best-paying basin. It is regasified on arrival, at an import terminal, to inject it into the grid. According to the LNG association, world trade reached about 400 million tonnes in 2024.

This chain has an energy cost, often forgotten. Liquefying, shipping and regasifying consume between 10 and 15% of the gas’s initial energy content. It is this cost, added to freight and margin, that explains the premium of the import benchmarks over Henry Hub. It also explains why LNG does not redirect instantly: a carrier takes weeks to switch basins, and liquefaction plants are built over years. LNG’s flexibility is real but slow, which lets price spreads persist longer than in oil.

The units, a trap to avoid

Comparing the three benchmarks requires handling their units, and that is where errors creep in. Henry Hub and JKM are quoted in dollars per MMBtu, the million British thermal units. TTF is quoted in euros per megawatt-hour. Yet a MWh is worth about 3.412 MMBtu, and the euro must still be converted to the dollar. A TTF at 40 euros a MWh therefore does not compare directly to a JKM at 13 dollars a MMBtu without going through these conversions. Many hasty comparisons conclude to an arbitrage that does not exist, for lack of aligning the units. The rule is simple: bring the three prices to dollars per MMBtu before any comparison.

The arbitrage: who captures the cargo

Once the prices are aligned, the mechanics become clear. A cargo of LNG not committed under a long-term contract goes to the basin that pays it best, net of costs. Concretely, if Asian JKM exceeds European TTF by more than the shipping cost and the boil-off en route, cargoes divert from Europe to Asia, and vice versa. The TTF-JKM spread is thus the market’s compass: it says not only which basin is more expensive, but where the next ships will go.

This arbitrage has a political consequence. In a shock, Europe and Asia compete for the same cargoes, and the marginal price rises for whoever has to outbid. That is what happened during the 2026 Hormuz crisis, when the suspension of part of Qatari production removed at a stroke nearly a fifth of world LNG supply, sending TTF above 60 euros a megawatt-hour in a single session. Record US export volumes only partly offset it, because LNG often sets the marginal price in Europe.

Storage and chokepoints: the shock absorbers

Two variables cushion or amplify these shocks. Storage, first, especially European: the fill levels of gas reserves before winter determine Europe’s margin against a rupture. Full storage can absorb a cut for a few weeks; low storage turns the slightest incident into a spike. Following the fill rate of European storage is therefore one of the most predictive signals for TTF.

Maritime chokepoints, next. A major share of world LNG depends on a few narrow passages, first among them the Strait of Hormuz, through which almost all Qatari exports transit. We documented in the Hormuz supply chain how a disruption of this corridor, aggravated by the absence of an alternative route for gas unlike oil, transmits directly to TTF and JKM. Gas is more vulnerable than oil to these chokepoints, because it has neither a bypass pipeline of the right scale nor a spot market as fluid.

The signals to watch

Five needles concentrate the information on this market. The three benchmarks brought to a single unit, dollars per MMBtu, to read the hierarchy and its distortion. The TTF-JKM spread, to anticipate the direction of cargoes. The fill rate of European storage, a barometer of resilience to a shock. US export capacity and the feedgas of liquefaction plants, which cap flexible supply. And the state of maritime chokepoints, Hormuz first, on which access to Gulf gas depends.

Gas is a market of pipes and ships before it is a market of prices. Its fragmentation into three basins, the slowness of its arbitrage and its dependence on a few narrow passages make it an asset where geography counts as much as supply and demand. Reading gas means following not a figure but a spread, and remembering that what costs the most is not the gas, but the voyage it must make to reach where it is scarce.

Sources

• LNG Allies (liquefiednaturalgas.org), “LNG Pricing & Market Benchmarks: Henry Hub, TTF, JKM Explained” (role of the three benchmarks, $5-10/MMBtu TTF/JKM premium over Henry Hub): https://liquefiednaturalgas.org/market/pricing/
• LNG Allies, “LNG Market” (liquefaction-shipping-regasification chain, world trade ~400 Mt in 2024, energy cost of 10 to 15%): https://liquefiednaturalgas.org/market/
• ICE, “Natural gas benchmarks: a new landscape” (globalisation of gas, liquidity and hedging of the benchmarks): https://www.ice.com/insights/market-pulse/lng-trading-liquidity-hedging-a-new-landscape-for-natural-gas-benchmarks
• LNGPriceIndex, JKM, TTF and Henry Hub quotes (indicative levels and units): https://lngpriceindex.com/lng-benchmark
• Natural Gas Intelligence, “U.S. LNG Profits Exposed as Market Again Shifts, Global Natural Gas Prices Converge” (convergence and inter-basin arbitrage): https://naturalgasintel.com/news/us-lng-profits-exposed-as-market-again-shifts-global-natural-gas-prices-converge/

This guide is educational analysis and does not constitute investment advice. Price levels are indicative and cited as of the date of their sources.