European Union Turns Gaze to U.S. LNG

In the run-up to Russia’s invasion of Ukraine in February, Henry Hub natural gas spot prices – the benchmark for U.S. natural gas – climbed higher (+7.0% MoM) as Europe shifted towards using U.S. liquefied natural gas (LNG) as an alternative to Russian LNG. To accommodate increased European demand, the U.S. is expanding its export capacity and is trending towards becoming the world’s top LNG exporter by the end of 2022.

Currently, the U.S. is the third-largest global LNG exporter, behind Australia and Qatar, with around one-third of U.S. exports headed for Europe. Within Europe, the U.S. represents the largest share of LNG imports. In February, power outages at one of the biggest U.S. LNG export terminals caused U.S. LNG pipeline receipts i.e., exports, to fall slightly (-1.2% MoM), yet they remained above previous periods (+38.0% YoY/+41.6% YoY2*).

While U.S. natural gas production was stable (+0.5% MoM) in February ­– it grew an impressive +9.7% YoY, unhampered by weather-related production issues. February 2021’s record-breaking cold snap accelerated demand, and combined with production freeze-offs, Henry Hub spot prices peaked, causing year-over-year price comparisons to be lower (-12.4% YoY).  

Data	MoM	YoY	YoY2*
Henry Hub Natural Gas Spot Prices	7.0%	-12.4%	144.9%
U.S. Natural Gas Production	0.5%	9.7%	-1.0%
U.S. Natural Gas Consumption	-6.6%	-3.5%	1.2%
U.S. Natural Gas Inventories	-30.8%	-13.4%	-18.5%
U.S. LNG Pipeline Deliveries (Imports)	10.0%	-21.4%	37.5%
U.S. LNG Pipeline Receipts (Exports)	-1.2%	38.0%	41.6%
Source: Big Data Federation, Inc.

Higher exports caused inventories (-30.8% MoM) to decline, registering a level well below the five-year average. A warmer than expected winter slowed domestic demand (-6.6% MoM), helping offset surging European demand. Rising temperatures in the coming spring months should aid in building reserves and ease upward pricing pressures.