Natural gas: How is the shipping channel driving gas volatility? – Societe Generale

Implied volatility in natural gas is increasingly influenced by freight costs, the adequacy of inventories and the security of LNG trade routes, particularly when maritime disruptions intensify. Societe Generale analysts Michael Haigh and Jeremy Sellem see LNG shipping conditions as a crucial channel through which maritime risk feeds into gas-market volatility, as Europe becomes more reliant on LNG imports and the United States on exports.

How Do Freight Costs and Inventories Shape LNG Risk?

"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.)