Spain and Italy, normally the most expensive gas markets in Europe, have been trading far 

below US and Middle Eastern LNG netbacks, the theoretical breakeven points, since a price 

hike on the JKM prompt saw it shoot up $1 to around $11.50/MMBtu Thursday. 

Spanish PVB seen exposed to upside risk on heatwave 
JKM large increase makes Europe unattractive 

Spain flips to premium to Italian PSV as Brent pressures Italy 

Therefore if gas-for-power demand surges due to heatwaves this summer, prices could see 

significant up-swings to attract additional LNG, with the Spanish PVB seen more exposed th

an Italy. 

The estimated US LNG breakeven price of $9.95/MMBtu is currently well above the Italian P

SV  price  for  July  delivery  of   almost  $8.213 /MMBtu, and the Spanish PVB equivalent of 

$8.409/MMBtu, according to S&P Global Platts pricing data. 

Platts Analytics data estimates that a heatwave could increase gas-to-power demand in Sp

ain to 30-40 million cu/d as seen in previous heatwaves, compared with a June average of 

15 million cu m/d, bringing higher LNG send-outs as pipeline flows are topped and possibly 

prompt Spanish PVB prices to jump to compete with much higher prices in Asia to attract 

additional LNG cargoes. 

In Italy, previous heatwaves have seen gas-for-power demand rise to 70-90 million cu m/d 

compared with a June average of 50 million cu m/d. 

Injection demand is also a concern. The injection period is underway until October and gas 

stocks in Spain are below last year's levels at 62% full compared to 67%. Thus any increase 

in demand over the summer from the gas-to-power sector will compete with storage injection 

demand. 

Spanish gas pipeline systems are running at seasonal levels and close to full capacity, with 

only 26 million cu/d left to reach full capacity. 

Latest Algerian flows were seen at 49 million cu m/d out of the total 66 million cu m/d, while 

French were seen at 11 million cu m/d out of the 20 million cu m/d. 

A sharp increase in JKM, the international benchmark for LNG, has rendered Southern 

European gas markets unattractive for both US and Middle Eastern LNG cargoes. 

JKM prices have risen sharply due to strong demand from Japan and South Korea amid 

supply worries. But they have eased slightly in previous sessions on Brent losses, with pri

ces steady Tuesday.