The U.S. Energy Information Administration (EIA) warned on Monday that a colder-than-usual winter in the Northern Hemisphere could lead to tighter global natural gas supplies and higher prices.
The previous two winters saw mild weather, which helped keep natural gas markets well-supplied and prices low. However, this year’s colder forecast could change that trend.
The EIA noted that the shift from El Niño to La Niña, which generally brings colder and drier weather to the Northern Hemisphere, could increase natural gas demand. This shift may lead to competition between Europe and Asia for liquefied natural gas (LNG) supplies.
In addition, the EIA pointed out that there will be limited increases in LNG export capacity, mostly in the U.S., while Europe could face reduced natural gas supplies if the Russia-Ukraine transit agreement expires at the end of the year.
The EIA also listed other supply risks, including delays in new project start-ups, the availability of natural gas for export, unexpected outages at LNG plants, and geopolitical issues that could disrupt trade flows.
In the U.S., colder weather could deplete inventories and drive up LNG export prices. The possibility of unplanned plant shutdowns and production freeze-offs could further raise international prices.
According to the EIA’s latest short-term energy outlook, U.S. LNG exports are expected to average 13.7 billion cubic feet per day this winter, an 8% increase compared to the previous winter. U.S. natural gas prices have already surged in the past week, as freezing temperatures arrived and the EIA reported its first inventory withdrawal of the season.
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