Freezing weather in the US halts gas and oil exports from the Gulf of Mexico

Much of the United States has been hit by freezing weather since the weekend, with impacts on global energy markets, including Europe. The extreme cold, which has also reached the southern United States, is curbing exports of liquefied natural gas (LNG) and oil. Data from tanker-tracking company Vortexa show that oil and LNG exports from the Gulf of Mexico came to a complete halt on Sunday. The situation began to improve on Monday, although LNG exports remained limited.

With Russian natural gas flows reduced, LNG supplies have become more important to Europe than ever before. The United States is the largest supplier of liquefied gas to European markets. European markets therefore react strongly to any risks of export restrictions. These need not be linked only to technical problems or freezing weather. Geopolitics also plays a role, with US efforts to acquire Greenland the latest example.

Freezing weather means strong domestic demand and reduced production

While markets can only speculate about geopolitical developments, the arrival of freezing weather is already having real effects. Plunging temperatures have driven a sharp increase in domestic demand for natural gas and electricity across the United States. Sub-zero temperatures have also curtailed oil and gas production there. Analysts estimate that oil production could fall by as much as 2 million barrels per day, or more than a tenth. Natural gas production is also expected to temporarily decline by around 10%.

According to Samantha Santa Maria-Hartke, head of market analysis at Vortexa, exports of oil and gas were curtailed in part by the precautionary closure of ports. Exports resumed on Monday after the ports reopened. US oil exports from the Gulf of Mexico fell from 4.2 million barrels on Saturday to zero on Sunday. As for liquefied gas, the US exported volumes equivalent to 159 million tonnes of LNG per year on Saturday, but exports halted on Sunday. LNG tankers began departing from terminals in the region again on Monday, although volumes were roughly half Saturday’s level.

Limited gas exports from the US are keeping natural gas prices on European markets at their highest levels since last June. Natural gas prices had already begun rising in mid-January due to other factors, but any risk to, or current curbs on, LNG supplies to global markets only exacerbate the situation.