High gas prices in America are canceling export shipments and threatening Europe
Recent reports from S&P Global have revealed dramatic shifts in the US energy market, with the record-breaking and sudden rise in natural gas prices within the United States leading to a radical change in trade patterns, prompting several major liquefied natural gas exporters to cancel their export shipments and redirect them to the energy-hungry domestic market.
The markets experienced extreme volatility, with spot gas prices surging to break the $30 per million British thermal units barrier on January 27, an exceptional price level reflecting the pressure on the grid, before prices fell sharply to settle at around $9 the following day, highlighting the markets' sensitivity to climatic and logistical variables.
Production stopped and wells froze
Sources attributed this price volatility to a severe cold wave that struck key production areas, causing "well freezes," where extremely low temperatures freeze fluids inside gas extraction pipes, forcing production shutdowns. This was directly reflected in February US gas futures contracts on the NYMEX exchange, which saw a significant increase to $6.954 per million British thermal units (MMBtu).
The data confirmed a significant decline in liquefied natural gas production at all eight major liquefaction facilities in the United States, leading to a shortage of supplies flowing to liquefaction plants on the Gulf Coast and prompting companies to reprioritize to meet rising domestic demand for heating and electricity generation.
Strategic shift: from export to import
In a rare move reflecting the severity of the temporary crisis, the United States—one of the world's largest gas exporters—has shifted to increasing its imports. On the East Coast, critical facilities like Elba Island in Georgia and Cove Point in Maryland have redirected their shipments to the domestic grid instead of exporting them. This has been achieved by importing new shipments or regasifying previously stored liquefied natural gas (LNG) for pipeline delivery.
Estimates suggest that up to 15 previously scheduled export shipments may be canceled. Meanwhile, LNG shipments to US ports reached their highest level in nine years, with the Elba Island terminal receiving the tanker Paris Knutsen from Trinidad on January 28 to help offset domestic shortages.
Worrying implications for European energy security
The effects of these disruptions are not limited to the United States; they cast a dark shadow over Europe, which is increasingly reliant on American gas to compensate for Russian supplies. This news comes at a critical time for Europe, as data shows that European gas inventories have fallen to alarming levels, reaching only 44% by January 26.
This level is the lowest seasonally since 2022, raising serious concerns about the ability of the Old Continent to get through the rest of the winter without supply crises, especially if the United States continues to reduce its exports to meet its domestic needs, which could ignite fierce global competition for available gas shipments and raise prices globally.
