A larger number of LNG cargoes are now held at sea, enabling traders to respond more quickly to regional price swings. — Reuters
AN Arctic blast sweeping across the US Northeast and Midwest has triggered a sharp rally in natural gas prices on fears of production disruptions.
The spike has reverberated across overseas markets, underlining the growing globalisation of the US-dominated liquefied natural gas (LNG) trade.
US natural gas futures have surged by almost 70% over the last week to US$5.35 per million British thermal units (mmBtu), their highest since December 2022.
The cold spell is set to lift domestic gas demand this week to 156 billion cubic feet per day (bcfd), compared with a five-year January average of 137 bcfd, according to LSEG forecasts.
At the same time, icy conditions are forcing drillers in regions such as the Permian shale basin in Texas and New Mexico to curb output due to “freeze-offs,” when water and other liquids in the gas stream freeze.
The trend will likely intensify as temperatures drop further.
Average gas output in the United States has already slipped to 108.4 bcfd so far in January, down from a record 109.7 bcfd in December, LSEG data showed, partly due to the cold weather.
Tighter US supply could reduce LNG exports, as liquefaction plants receive less feedgas.
Severe cold has curtailed oil and gas production several times in recent years.
A 10-day cold spell in January 2024 led to a 3% drop in average monthly dry gas output, according to US Energy Information Administration data.
And three years earlier in February 2021, Winter Storm Uri led to a drop of over 20% in gas output at the lowest point compared with pre-storm levels.
LNG feedgas fell by as much as 75% during the storm, leading to a 30% drop in February LNG exports that year, according to Kpler.
In each of these past Arctic blasts, output generally rebounded within a month or two. But since Uri, the United States has nearly doubled its liquefaction capacity, becoming the world’s top LNG exporter, meaning a disruption today could create a much larger shortfall.
Global knock-on effect
What has changed in recent years is that cold weather conditions in the United States can now lead to higher gas prices in Asia and especially Europe, which is heavily dependent on US LNG after Russia slashed pipeline flows following its invasion of Ukraine in 2022.
The United States has since 2023 dominated the LNG market, becoming the first country to export over 100 million tonnes per year in 2025.
Around two-thirds of that was delivered to Europe, according to data analytics firm Kpler.
Benchmark European TTF gas prices gained over 6% last week to almost 40 per megawatt hour, or US$13.75 per mmBtu, the highest since June 2025.
Prices have risen by 38% so far this month, driven by a rapid depletion of regional gas stocks, which are currently 48% of capacity, far below last year’s level of roughly 58%.
Europe is expected to import a record amount of LNG this year, the International Energy Agency said, with the bulk of the increase expected to come from the United States.
To be sure, the current rally pales in comparison to the post-invasion spike in 2022, when TTF prices quadrupled to more than 300 per MWh.
Global LNG prices eventually returned to near pre-invasion levels, helped by surging new supply that is expected to keep prices relatively low in coming years.
Between 2025 and 2030, new LNG export capacity is expected to grow some 50%, or by 300 billion cubic meters per year globally, driven mainly by the United States and Qatar, according to the IEA.
Interconnected market
Yet, the increasingly interconnected LNG market means that when sudden shifts in supply or demand do occur in major producing areas, whether due to outages or extreme weather, the global impact will be more pronounced than in the past.
And, importantly, climate change is likely to make such extreme weather events more frequent.
“The global gas market has become far more interconnected,” said Mashal Jaffery, partner at gas and LNG commercial advisory Baringa.
“Regardless of their absolute price levels, markets such as TTF and (US) Henry Hub are now structurally more volatile and increasingly exposed to supply, demand, and geopolitical dynamics originating outside their own regions.”
Of course, the global gas market has adapted.
A larger number of LNG cargoes are now held at sea, enabling traders to respond more quickly to regional price swings.
This can help the market respond to short-term demand spikes and ultimately smooth volatility.
In other words, the gas market – which has long been highly regional in nature – is now starting to look like the modern, highly liquid oil market. — Reuters
Ron Bousso is a columnist for Reuters. The views expressed here are the writer’s own.
