European natural gas prices have fallen significantly ahead of the inauguration of US President-elect Donald Trump on Monday. Market participants are anticipating the potential impact of future policies on the natural gas sector, making markets volatile.
Trump is expected to sign a number of executive orders after taking the oath of office, which could include lifting the current moratorium on liquefied natural gas (LNG) export permits. This move would directly impact natural gas markets, particularly in Europe.
Gas Futures Decline
The benchmark Dutch Title Transfer Facility (TTF) contract fell 1.5% to EUR 46.17 per megawatt hour. Despite the drop, prices are still up 4.5% from a month ago. The continued shortage of rapid supplies in inventories adds to the pressure on gas demand in Europe, driving the rise.
At least six LNG cargoes from the US that were initially destined for Asian markets have been diverted to Europe recently. The shift comes after European natural gas prices rose in recent weeks, while Asian markets saw prices fall.
LNG Flow Shifts
US shipments were initially destined for countries such as China, South Korea, Singapore, and Thailand, but between January 8 and 14, LNG tankers changed their route to Europe. These shifts come as a result of weak demand in Asian gas markets, with high inventories in those regions.
In this context, LNG prices rose in Asian markets, but this increase was not enough to maintain a high enough premium over European prices to stimulate the sale of shipments to Asia. This shift in gas flows illustrates the significant impact of prices and changes in demand in different markets.
The Impact of US Policy on the Natural Gas Market
US policy plays a major role in shaping global natural gas markets. Political decisions affect gas prices, supply flows, and market stability. In this article, we will review the impact of US policies on the natural gas market by examining the actions and trends that can contribute to the volatility of this vital market.
US Policy and Shifts in Natural Gas Demand
The United States is one of the largest producers of natural gas in the world, which makes the impact of its policies on the international market tangible. With the increase in shale gas production, America has become a major exporter of liquefied natural gas (LNG). Therefore, any political decision regarding the level of production or export can directly affect global prices.
Under current US policy, the volume of natural gas exports to international markets is expected to increase. The US government has repeatedly announced plans to support exports and increase the capacity of ports to handle gas shipments. This would enhance the role of the United States as a major gas supplier to the European and Asian markets.
Economic Sanctions and Natural Gas
Another impact of US policies on the natural gas market is the imposition of economic sanctions on gas-producing countries. The United States has imposed sanctions on Russia and Iran, which has affected gas supplies from these two countries. These sanctions have led to gas markets shifting to more reliance on alternative suppliers such as the United States and Qatar.
Europe is highly dependent on Russian gas, so imposing sanctions on Russia or reducing cooperation with other producing countries has wide-ranging implications. In such cases, European countries are turning to new markets such as the United States for LNG.
The impact of cold weather on prices in Europe
Meanwhile, gas prices in Europe remained high in January, due to several factors, most notably the disruption of gas supplies via the Russian pipeline through Ukraine. In addition, early cold snaps in northwestern Europe contributed to increased natural gas consumption, prompting several countries in the region to increase their LNG imports.
US Gas Imports to Europe Increase
As a result of increased demand in Europe due to low temperatures, US LNG imports recorded high levels, reaching their highest level since January 2024. This increase in imports clearly reflects changes in natural gas flows due to changes in weather and higher energy demand in Europe.
Analysis and Future Forecasts
Spark Commodities, a gas market analysis company, said that LNG ships are heading towards Europe as US arbitration on gas exports to Asian markets continues to close. Geopolitical and economic factors will continue to shape future market trends, causing natural gas prices in Europe to remain high in the coming weeks.
In addition, the February 2025 US arbitrage assessments indicate that arbitrage to Asian markets remains locked in at -$0.845 per mmBtu. This assessment confirms that incentives still encourage US vessels to deliver gas to Northwest European markets rather than to Asia.
Clearly, European natural gas markets will continue to face complex challenges in the near future. New policies that US President Trump may take after taking office will have far-reaching implications for market dynamics. The EU closely monitors the situation and considers imposing restrictions on Russian gas imports. Gas markets adjust to ongoing changes in supply and demand.
