The US Deadly Blizzard Will Disrupt the American Gas Supplies to Europe

The blizzard that hit the United States in recent days has brought anxiety back to global energy markets, especially in Europe, as the wave of bad weather froze gas wells and pipelines, which increases concern about the price rise, especially in light of the increasing needs in the winter.

Natural gas production in the United States fell to its lowest level in more than a decade on December 23, to begin to improve slightly after that, but it is still about 10% less than the normal rate, according to estimates published by the US Bloomberg Agency, on December 27.

Bloomberg indicated that the production of heating fuel and electricity generation is expected to reach 90 billion cubic feet, according to pipeline schedules.

The blizzard, known as the “bomb cyclone” or “bombogenesis,” knocked out many wells in key producing areas, including the largest resource in Texas, and reduced supplies across 48 states, by nearly 10 billion cubic feet while domestic demand rose to the highest daily level since early 2019. One billion cubic feet of gas is enough to power about 5 million American homes for an entire day.

 

Deadly Winter Storm

The state of Montana, western United States, was the most affected by the cold, as temperatures dropped to minus 45 degrees Celsius during the storm, before improving slightly since December 26, while expectations still indicate that the bad cold wave will continue.

The storm that killed dozens in the United States over the Christmas holidays is still weighing on New York state and the flights across the country, with stories of families trapped for days.

The number of winter storm-related deaths—most of them road accidents—rose to at least 50 after officials confirmed another death in western New York.

“Unfortunately, @BPD alerts expect that number to rise,” Buffalo Mayor Byron Brown said on Twitter. Buffalo was paralyzed for five days due to snow and power outages, and more snow is expected.

New York State Governor Kathy Hochul, who was born in Buffalo, likened the situation after the storm to a “war zone.”

The deadly winter storm may disrupt global supplies from one of the largest exporters of liquefied natural gas, which will harm the market. The latter has witnessed severe price fluctuations this year, according to the American Oilprice.com website.

This storm is the latest severe shock for the global liquefied natural gas market this year, confusing the calculations of Europeans, in particular, in maintaining stock levels to face the stormy winter.

The damage to US gas supplies, which is also described as “one of the greatest extents of winter weather warnings and advisories ever” by the National Weather Service, coincides with Shell’s suspension of production at the world’s largest floating liquefied gas station in Australia. After a fire broke out, Shell reduced fuel supplies which might increase turbulence in the global energy market and price hikes with the onset of the winter season.

 

Global Impact

The global demand for liquefied gas rose to 97 million tons during the third quarter of this year, an annual increase of 8%, compared to 90 million tons during the same period of 2021.

LNG prices rose to record levels earlier this year as Europe raced to stock up on the fuel before this winter. Between January and November, LNG imports to the EU and UK combined jumped 65% year-on-year, according to estimates from the Oxford Institute for Energy Studies.

Imports from the US alone rose by 176%, while imports from other sources grew by 27%. In the same period, global LNG exports grew by just 5.5%, with nearly half of the growth coming from the United States, according to the institute’s data.

In recent years, multiple hurricanes have caused varying degrees of disruption to the global liquefied natural gas market. Hurricane Laura in 2020 led to the disruption of the Sabine Pass facility in Louisiana for exporting liquefied gas for two weeks, while the Cameron refinery was disrupted for more than a month. Last year, Hurricane Ida led to a significant and prolonged reduction in gas production from the Gulf of Mexico.

This year, the explosion of the Texas-based Freeport LNG facility last June disrupted nearly 20% of LNG export capacity, which led to a deterioration in LNG markets as well.

The production disruption at the station threatens to exacerbate the global energy shortage as winter demand for liquefied natural gas reaches its peak and prices rise again, while the energy crisis in Europe, exacerbated by the Russian war on Ukraine, has pushed LNG prices to record levels in current year.

 

European Crisis Deepens

Next year, Europe will need more LNG supplies to make up for the Russian gas shortage. According to a recent report by the Trafigura commodity trading company, with the decrease in gas shipments through Russian pipelines, Europe will need huge quantities of LNG in 2023, expecting continued fluctuations in the natural gas and LNG markets.

Europe’s need for huge quantities of LNG prompts it to make price levels high so that the cold continent can continue to attract most LNG shipments, in competition with other major demand centers, according to Trafigura.

With the European shift to American LNG, there is a serious concern about dependence on these supplies, which may be unreliable in light of the frequent wrath of nature. The increasing European dependence on American gas may turn into a source of deep concern for families and companies on the European continent, which bear the high costs of bills that will reach about two trillion dollars in 2023.

The bulk of US LNG export facilities are located along the coast of the Gulf of Mexico, as much of the gas that feeds these facilities comes from nearby inland reserves, from New Mexico and Texas to Louisiana, which are areas prone to hurricanes, which means that when snowstorms and hurricanes come As in previous years, everything from extraction and liquefaction to shipping is at risk of being disrupted, according to Oilprice.com.