Natural gas: Shipping channel drives gas volatility – Societe Generale

Societe Generale analysts Michael Haigh and Jeremy Sellem argue that LNG shipping conditions are central to how maritime risk transmits into natural gas volatility. As Europe relies more on LNG imports and the United States on exports, freight costs, inventory adequacy and security of LNG trade routes become key drivers of implied volatility, especially during periods of heightened maritime disruptions.

Freight 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."