At Any Rate
Global Commodities: A bitter cold US natural gas market ramps up LNG supply as Europe struggles to win cargoes
Jan 17, 2025
Otar Dgebuadze, a Global Natural Gas Research Analyst at J.P. Morgan, dives into the tumultuous landscape of the natural gas market. He discusses how colder weather in the US and Europe is driving up natural gas demand, stressing storage capacities. The conversation explores supply challenges, including production freeze-offs and the impact of geopolitical tensions on Russian gas flows. Furthermore, they highlight Europe's struggles with LNG imports and the urgent need for strategies to meet storage goals as prices surge.
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Quick takeaways
- The U.S. natural gas market faces upward price pressure due to cold weather, increased demand, and supply challenges resulting from freeze-offs.
- Europe's natural gas market struggles with low storage levels and reduced LNG imports, necessitating a 50% increase in LNG inflow to meet targets.
Deep dives
U.S. Natural Gas Market Under Cold Weather Strain
The U.S. natural gas market is experiencing significant upward price pressure due to an exceptionally cold winter, with January expected to be the third coldest since 2000. Forecasts indicate that heating degree days will be well above the 10-year normal, leading to a sharp increase in demand, particularly for residential and commercial heating. This heightened demand is met with production challenges as freeze-offs have caused a reduction in supply, tweaking estimates for January production downward. Overall, the combination of increased heating demand and limited production capacity is likely to result in a notable drawdown in storage levels, surpassing 1 trillion cubic feet for January alone if current weather patterns hold steady.
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