US ELECTIONS: LNG markets brace for volatility after Trump victory

Global LNG market participants braced for near-term volatility after former US President Donald Trump was elected to a second term, with prices softening in the immediate wake of the race being declared.

LNG prices in Europe and the value of LNG traded free on board from the US Gulf Coast dropped Nov. 6, after the Associated Press called the race for Trump, as traders weighed near and longer-term impacts of shifts in the American approach to issues including geopolitics, energy infrastructure permitting and trade.

Platts, part of S&P Global Commodity Insights, assessed DES Northwest Europe Marker for December at $12.543/MMBtu on Nov. 6, down 16.6 cents/MMBtu on the day.

Across the Atlantic, Platts assessed the Gulf Coast Marker for US FOB cargoes loading 30-60 days forward at 11.95/MMBtu Nov. 6, down 16 cents on the day.

Even though Trump won't assume office until January, market participants described a sentiment-driven price response over factors such as an expectation of greater support for US LNG production, including a resumption of LNG export permitting, and the possibility of relaxed sanctions on Russian LNG that could expand global supply.

At the same time, market sources were wary of short-term bullishness due to geopolitical tension, including the possibility that the new administration's posture toward Israel could influence escalating tensions in the Middle East.

"Too early to tell to be honest," a Mediterranean based trader said Nov. 6 on whether Trump's election would prove bearish or bullish for the market. "My view was that TTF will be bullish with Trump due to geopolitical concerns, but today in his speech he was a pacifist."

European LNG markets remained structurally weak amid the sentiment-driven prompt month activity on ample storage inventories and muted demand weighing on the appetite for spot purchases.

"By the time he takes office, winter uncertainties should be mostly resolved," another Atlantic-based LNG trader said. "Depending on actions taken regarding the geopolitical conflicts it may have a bullish connotation."

Risks associated with Middle East conflict were viewed as the most immediate.

"Trump is likely to impose less pressure on Israel's government to restrain the scope of its military actions in Gaza and Lebanon, with the president-elect having been reported as encouraging Israel to 'finish the job in Gaza'," Mehrun Etebari, a director of LNG analytics at Commodity Insights, said Nov. 6.

Further escalation in the conflict could lead to heightened risk of retaliatory attacks on Israeli gas infrastructure, potentially reducing supply to Egypt and Jordan and pushing the countries to increase LNG imports, Etebari said. Such a situation would create greater competition for supply.

"A lower likelihood, but far higher impact" scenario involves the possibility of escalating hostilities with Iran and the potential disruption or closure of marine traffic through the Strait of Hormuz, which could have a significant impact on the global LNG trade, Etebari said. The Washington-Tehran relationship was more confrontational during Trump's first term than in the Biden administration, marked by the US exit from a deal that eased restrictions on Iranian oil exports in exchange for nuclear controls and by the US assassination of Iranian military commander Qasem Soleimani.

Concerns that energy infrastructure in Israel or Iran could come under threat could add a risk premium for the prompt months.

On the other hand, traders were weighing the implications of Trump's election on the fate of the Russia-Ukraine gas transit agreement set to expire by-year end and whether a policy shift that supports negotiations to keep the status quo would be a bearish market factor.

In Asia, as Trump was leading but before the election was called, Platts assessed the December JKM benchmark price at $12.928/MMBtu, down 38.1 cents/MMBtu on the day. Sentiment in the region was mostly cautious, but market participants described a bearish sentiment as Trump led with an expectation of increased supply in the long-term that will benefit buyers.

"There will be a boost in oil and natural gas industries," an Asian source said.

On the campaign trail, Trump promised to approve LNG projects and end the US Energy Department's pause on issuing key export permits as a "day one" priority. The Biden administration's pause, announced in January, has created uncertainty about the long-term market share of US LNG while slowing progress on several major US LNG projects. The US became the world's biggest LNG supplier in 2023.

Tariffs, which Trump pledged to impose as a part of his economic pitch to voters, are another major issue for the sector. In the runup to the election, Trump floated a 60% tariff on imported Chinese goods and a 10% to 20% tariff on goods imported from all other countries. During Trump's first presidency, a trade dispute with China restricted flows to that country's massive market and slowed commercial negotiations tied to US LNG projects.