Natural Gas News: Russian Supply Risks Drive European Shift to U.S. LNG, Lifting Futures

U.S. Natural Gas Futures Surge as Ukraine Secures First LNG Shipment

U.S. natural gas futures climbed sharply on Monday, reflecting a significant gap higher on daily and weekly charts. Futures are currently testing the June 11 peak of $3.904. A breakout above this level could push prices toward the next resistance at $4.442, while downside support lies within the gap between $3.648 and $3.614.

At 14:06 GMT, Natural Gas futures are trading $3.948, up $0.565 or +16.70%.

Ukraine’s LNG Milestone

Ukraine has secured its first liquefied natural gas (LNG) shipment from the United States, marking a shift in regional energy flows. The shipment, received via Greece’s LNG terminal, was fully purchased by DTEK, one of Ukraine’s largest energy firms. The cargo contains 100 million cubic meters of gas and highlights Ukraine’s efforts to secure alternative energy sources as tensions with Russia persist.

DTEK also finalized a long-term supply agreement with U.S.-based Venture Global, ensuring LNG deliveries through 2026. A separate 20-year deal further cements this partnership, reinforcing Ukraine’s move toward reducing reliance on pipeline gas from Russia. Although Europe sources approximately 40% of its LNG from the U.S., Ukraine’s direct purchase is a notable first.

Transit Risks and European Supply Concerns

The imminent expiration of Russia’s gas transit deal with Ukraine on December 31 threatens to disrupt flows to Slovakia, Hungary, and Austria. Slovak Prime Minister Robert Fico warned that losing this transit route could drive energy costs higher across Central Europe, potentially costing Slovakia up to €500 million in lost fees.

Slovakia has threatened to suspend electricity exports to Ukraine if transit halts, escalating tensions between the two nations. Ukrainian President Zelensky accused Slovakia of aligning with Russia, while Slovakia urged the European Commission to mediate, citing broader economic risks for the EU.

The closure of this transit route could further restrict Russian gas supplies to Europe, forcing countries to seek additional LNG from the U.S. and other exporters. As pipeline flows tighten, European buyers may increase purchases of U.S. LNG to fill the gap, intensifying competition with Asian markets for limited cargoes.

Market Impact and Forecast

European natural gas prices remain elevated, trading just below €48 per megawatt-hour. Colder weather forecasts and faster-than-expected storage drawdowns have added upward pressure. With the Russia-Ukraine transit agreement expiring, supply uncertainty is growing.

The risk of reduced Russian gas flows into Europe could drive increased demand for U.S. LNG, directly impacting U.S. natural gas futures. As European buyers secure more U.S. shipments to compensate for lost Russian supply, upward pressure on domestic prices may follow. This trend is likely to persist into early 2024, particularly if colder temperatures and export competition further tighten U.S. inventories. Futures could push past $4 if export demand intensifies, signaling a bullish outlook for U.S. natural gas prices.

More Information in our Economic Calendar.