Maguire: US natural gas prices prepare for the impact of tariff crossfire on US prices

The U.S. Natural Gas prices have already risen by 80% in the last year, but they are about to get a new jolt due to the knock-on effect of the most recent round of tariffs levied by the U.S. Government on goods entering the nation.

The U.S. Gas Market will be affected regardless of when and how the new tariffs come into effect. Exports of LNG in the form or gas are likely to become a bartering chip for any subsequent trade negotiations.

Commitments to increase purchases of U.S. LNG can be a quick way to rebalance the trade ledger to the U.S. for nations that are looking to reduce their trade surplus or avoid future tariffs.

As a possible form of reprisal, some countries that are impacted by the new tariffs and who already buy U.S. LNG regularly may also threaten to reduce their purchases.

Gas exporters, utilities and households will all be affected by the changes in the gas trade volume and price.

BIG STAKES

According to the U.S. Energy Information Administration (EIA), the U.S. exported nearly 12 billion cubic foot of LNG every day in 2024. This cemented its position as the world's top LNG exporter for the second consecutive year.

The LNG shipments generated more than $30 billion in revenue, which was significant for both the companies that shipped the gas as well as the U.S. Treasury.

According to Kpler ship tracking data, the Netherlands was the largest market for U.S. LNG in 2024, accounting for 11% of all volumes.

France, Japan and South Korea were the next biggest buyers of U.S. LNG. China, Turkey, Spain, and the United Kingdom also made a notable purchase.

Tipping the Balance

The administration of U.S. president Donald Trump has threatened to impose high tariffs on goods that these countries sell to the U.S., as the U.S. is running up large trade deficits.

All of these countries already buy a lot of U.S. LNG. It is likely they will increase their purchases in order to ease relations with the Trump Administration.

As part of the tariff negotiations, other countries with large trade surpluses, such as Vietnam, may also consider increasing U.S. LNG exports.

Plan B

LNG will also be a part of any countermeasures that nations take to retaliate against the U.S. after they raised tariffs.

China and a number of European nations, including Germany, have pledged to respond to planned tariff increases. They are likely to see LNG as a way to cause revenue damage to the U.S. while avoiding self-harm.

Qatar, Australia, and Malaysia also provide LNG to global clients, so they will be able quickly replace any U.S. LNG volumes lost, while U.S. LNG suppliers may find it difficult to quickly find alternative buyers.

GAS FLOW AFFECTS

The domestic gas market will be affected by the new tariffs in the United States, regardless of how the LNG export volume trends.

The increase in LNG imports will result in a higher demand for gas at LNG export terminals, and a tighter supply of gas for other gas consumers.

This will put pressure on U.S. utility companies that rely on gas to produce approximately 40% of their electricity.

In response to higher gas prices in the US, several utilities have already reduced their gas usage in favor of increasing coal-fired electricity generation.

Gas prices could rise further due to the renewed strength of LNG exports. This would lead to a surge in U.S. electricity emissions, which could accelerate climate changes.

If, on the other hand most trade partners choose to reduce U.S. purchases of LNG as part of tariff retaliation, then demand for LNG export terminals may drop, which could result in more gas being available domestically and lower gas costs.

It is likely that there will be mixed reactions among trading partners, as some countries may reduce their LNG purchases, while others might increase them.

These volume swings may eventually balance each other out, resulting in a total LNG volume that is largely unchanged by the end the year.

In the short term, however, the sudden changes in LNG order flows could trigger wild swings on the gas market.

Gas market participants will need to be able to take advantage of any price movements that are favorable and to avoid volatile market conditions.

These are the opinions of the author who is a market analyst at.

(source: Reuters)