U.S. natural gas futures surged 8.4% to $3.32/MMBtu on Monday, recovering from a nearly 12% drop last week, after President Trump announced on Saturday that he will impose tariffs on Canadian and Mexican oil, raising concerns about potential supply disruptions. The U.S. imports ~4 million barrels of Canadian oil daily, and more than 450,000 barrels of Mexican oil. Trump slapped Canada and Mexico with duties of 25% and China with a 10% levy. Goldman Sachs estimates that Canadian natural gas exports to the U.S. could drop by ~0.16 billion cubic feet per day (bcfd) thanks to these tariffs. Additionally, the Energy Information Administration (EIA) reported a massive gas withdrawal of 321 billion cubic feet (bcf) due to extreme cold, increasing heating demand.
“The first reason prices are higher is the 10 percent tariff President Trump put in place on Canadian energy imports,” David Seduski, the head of North American gas at Energy Aspects, told Rigzone. “The U.S. imports approximately five to seven percent of its daily gas supply from Canada (depending on the time of year). A 10 percent tariff raises the cost of those imports by about $0.20 per million British thermal units (MMBtu),” he added.
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Likewise, European natural gas futures have soared to €53 per megawatt-hour after surging 7.8% last week to a 15-month high, with traders assessing fluctuating demand and supply risk. Whereas the current month is expected to be warmer than usual, easing heating needs, Europe’s gas inventories have been draining at a faster-than-expected clip this winter with storage levels lower than average for this time of the year. The EU barely met its storage target, while key consumers like France fell short, raising concerns about summer restocking. Trump has pushed for the EU to buy more U.S. LNG, but short-term availability remains constrained due to full export capacity.
By Alex Kimani for Oilprice.com
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