Natural gas: Volatility driven by shipping channel – Societe Generale

LNG shipping conditions are a key channel through which maritime risk feeds into natural gas volatility, according to Societe Generale analysts Michael Haigh and Jeremy Sellem. Growing European dependence on LNG imports and US reliance on exports make freight costs, inventory adequacy and the security of LNG trade routes important drivers of implied volatility. Their influence is particularly significant when maritime disruptions intensify.

LNG Risk: Freight Costs and Inventory Adequacy

"Natural gas markets rely heavily on LNG shipping routes and inventory adequacy, making them particularly sensitive to disruptions affecting maritime logistics and energy security."

"The stronger relationship observed in gas markets is unlikely to be coincidental. Unlike refined products, natural gas increasingly relies on global LNG trade and maritime transportation. As Europe became more dependent on LNG imports and the United States emerged as the dominant source of export growth, shipping conditions have become a more important component of gas-market dynamics."

"LNG freight costs and TTF realized volatility surged simultaneously during the most acute phase of the 2026 maritime-risk shock. While freight rates measure the cost of transporting LNG cargoes rather than the price of gas itself, the observed co-movement highlights a potential transmission channel linking maritime disruptions to European gas-market volatility."

"Lastly, we assess the sensitivity to maritime attacks under different inventory levels. Not surprisingly, when inventory levels are tight, the impact on volatility is much greater. As European inventory levels are considerably lower than seasonal norms, we would expect with more attacks during the heating season, for implied volatility to increase."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)