Natural gas: US posts 26-month high amid tariff uncertainty
Quantum Commodity Intelligence - US natural gas futures continued to challenge post-2022 highs Monday as the run of cold snaps and depleted stocks was accentuated by the threat to Canadian supplies.
The front-month Apr25 Henry Hub contract was trading at around $4.53/mmBtu early-afternoon Eastern Time, up almost 3% since Friday's close and having peaked at $4.90/mmBtu early in the session.
"Natural gas prices actually hit the highest level since December 2022 in part because inventories have fallen well below average at a time where the projections of this summer's temperatures are going to be much warmer than normal and at a time where Canada is continuing to make threats to cut off supplies," said Phil Flynn of The Price Futures Group.
The initial spike triggered the limit-up circuit breaker on NYMEX, noted Flynn, a mechanism whereby an Exchange will use calming measures in the event of a rapid price movement.
Canadian energy sales to the US were levied with a 10% surcharge last week, and while full implementation of tariffs has been deferred, the measures have sparked concerns over a further round of tit-for-tat tariffs impacting natural gas and electricity imports.
The situation was further complicated after Ontario said it will proceed with a 25% tariff on electricity sale into the US, effective immediately.
"We will apply maximum pressure to maximize our leverage, that's why today we're moving forward with a 25% surcharge on electricity exports for the 1.5 million American homes and business that Ontario powers," Ontario premier Doug Ford said on Monday.
In the longer term, Canada has also flagged plans to expand its natural gas pipeline network and lift LNG capacity, although analysts have said such a move would likely take many years.
The trade row comes after the EIA last week reported US stocks had tumbled to the lowest levels since May 2022 after a bitterly cold winter lifted demand for heating, while a further decline is expected before winter is over.
Global energy prices spiked following Russia's 2022 invasion of Ukraine, but the decline had seen US natural gas prices particularly hard hit amid oversupply concerns before the Q1 rebound.
Exports
US prices have also been underpinned by global LNG demand, which is set to continue over the milder months as Europe needs to restock after inventories tumbled below 40% of capacity at the end of February.
Demand for feedgas reached record levels in February after increased capacity at Cheniere's Corpus Christi Stage 3 and the greenfield Plaquemines plant.
In its latest publication, the EIA reported 32 shipments leaving the US in the seven days to 6 March, with a combined LNG-carrying capacity of a record 122 Bcf.
This included 11 from Sabine Pass, five each from Cameron and Corpus Christie, four from Freeport, three from Plaquemines, with two each from Calcasieu Pass and Cove Point.
"We estimate that during January and February 2025, the newest U.S. LNG export facility—Plaquemines LNG Phase 1—exported a combined 15 LNG cargoes, indicating that the facility operated at 85% of its nominal capacity in February since the start of LNG exports in December 2024," said the EIA in a weekly report.
