U.S. Gas Markets Insulated from War

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Written by Daniel Graeber for IIR News Intelligence (Sugar Land, Texas)

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Summary

U.S. natural gas markets are shielded from the conflict in the Middle East, with domestic prices up only 5.8% since fighting began last week. It's a different story entirely in Europe, where the benchmark gas price is up 53%.

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U.S. Production Up from February

U.S. natural gas markets remain insulated from conflict in the Middle East, while exports of liquefied natural gas (LNG) are holding up, data show.

Commodity prices are getting a lift from the outbreak of war in the Middle East. A joint U.S.-Israeli attack that left Iran Supreme Leader Ali Khamenei dead has spread throughout the region, with Iran retaliating by targeting Western interests in the region.

Domestic U.S. markets, however, are shielded from the fighting. On Tuesday, Industrial Info put total U.S. natural gas production slightly above the month-ago average of 109 billion cubic feet per day (Bcf/d) on Tuesday, as warmer weather makes room for better drilling conditions.

Much of the production strength came from the Appalachia basin, centered around Pennsylvania and West Virginia. Close behind, with an average around 22.2 Bcf/d is Texas, home to the Permian shale basin.

In a status report, the Texas Independent Producers & Royalty Owners Association (TIPRO) reported that Texas set a record last year with annual volumes topping 13.5 trillion cubic feet of natural gas production.

"Thanks to record production, driven significantly by the Permian's improved well-productivity, domestic demand was met and natural gas continued to supply affordable and reliable power," said Ed Longanecker, TIPRO's president.

The Permian is the largest inland crude oil producer in the United States, but as the basin matures, crude oil molecules get trapped in subsurface pores while lighter molecules associated with natural gas escape because of pressure changes.

Though commodity prices are getting a heavy lift from war in the Middle East, U.S. gas markets have been spared. At the opening bell on Tuesday, Henry Hub, the U.S. benchmark for the wholesale price of natural gas, was trading at around $3.02 per million British thermal units. That's up 5.8% since the first trading day of March.

A bevy of projects still in the planning stage could be further supportive of the industry. On Monday, an affiliate of the Glenfarne Group signed a construction contract with Nebraska-based Kiewit Energy Group for help with the planned Texas LNG project at the Port of Brownsville.

Subscribers to Industrial Info's Global Market Intelligence (GMI) Project Database can learn more by viewing the related project reports. Glenfarne said this puts Texas LNG one step closer to a final investment decision. With a proposed design capacity of 4 million metric tons per annum (MTPA), Texas LNG could be in service by 2028. Renewable energy is expected to power the facility's electric motors.

Europe Isn't So Lucky

The largest LNG exporter in the world, U.S. supplies have supported European energy security since the war in Ukraine began in 2022. Europeans, however, are not as fortunate now, as rival supplier Qatar was knocked out by the conflict.

On Monday, Industrial Info issued a notice to clients that QatarEnergy had evacuated staff from its Ras Laffan LNG facility in response to a nearby drone strike. Outages in Qatar have sidelined about 20% of the global supply of LNG.

It's unclear how long the outage will last. The price for the Dutch Title Transfer Facility (TTF), the European benchmark for the wholesale price of natural gas, is up 53% since March 1. Supply-side pressures in the European market are the worst since the start of war in Ukraine.

By the Numbers

• 53% increase in TTF prices since March trading began
• 5.8% increase for Henry Hub

Key Takeaways

• U.S. gas production, LNG exports holding up
• Outages in Qatar have sidelined about 20% of global LNG

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About IIR News Intelligence
IIR News Intelligence is a trusted source of news for the industrial process and energy markets, powered by Industrial Info Resources' Global Market Intelligence (GMI).

About Industrial Info Resources
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 250,000 current and future projects worth $30.2 Trillion (USD).