Europe imports gas from Australia while a snowstorm in the US disrupts pipeline operations

Severe Winter Storm Disrupts Global Gas Supplies

A powerful winter storm stretching from Texas up to Maine has thrown the energy market into turmoil, severely impacting gas supplies across the United States.

Europe Turns to Distant Sources Amid US Supply Crisis

With American gas exports hampered by the extreme weather, Europe has been compelled to import liquefied natural gas (LNG) from as far away as Australia. The disruption has left traders scrambling to secure alternative shipments, including a Shell-chartered vessel carrying 170,000 cubic metres of LNG from Australia to Europe.

Additionally, LNG cargoes originally intended for Asia from Canadian terminals have been rerouted to Europe, with one shipment containing 174,000 cubic metres. However, these vessels are not expected to reach Europe until February, and forecasts of continued cold weather suggest that gas prices will remain elevated.

Storm Fallout: Frozen Facilities and Soaring Prices

The storm has blanketed much of the US in snow, causing widespread chaos and freezing critical infrastructure at American gas plants. As a result, Europe—now heavily dependent on US gas following the conflict in Ukraine—faces heightened vulnerability, with the US currently supplying about half of the continent’s LNG needs.

Ashley Kelty, an energy analyst at Panmure Liberum, highlighted the risks: “Europe has shifted its dependency from Russian to American gas, but this has brought it dangerously close to systemic failure. If delays in US shipments persist, gas reserves could fall below safe levels by mid-February, potentially leading to rolling blackouts.”

Current gas storage in the UK and Europe is at its lowest point since 2021, and if consumption continues at the present rate, reserves could be depleted within weeks.

Market Volatility and Global Repercussions

Martin Senior, head of LNG pricing at Argus Media, noted that the storm has triggered shortages and dramatic price increases in the US. American gas prices, typically lower than those in Europe, have surged to as much as ten times the European rate. For example, while European prices have hovered around €40 (£35) per megawatt hour, rates at US hubs like Cove Point in Maryland have reached €500 per megawatt hour.

This price disparity has prompted LNG tankers that would usually head to Europe to divert to the US, chasing higher profits. According to Senior, “This situation is likely temporary, but the recent price swings have resulted in the loss of about eight LNG cargoes that would have otherwise gone to Europe.”

He also warned that Europe’s underground gas storage is already below seasonal norms and could reach critically low levels in countries such as the Netherlands and Germany if February proves colder than average.

UK’s Gas Network and Storage Concerns

The UK is linked to a pan-European gas trading network via a pipeline to the Netherlands, allowing it to both supply gas to Europe and draw on European reserves when needed. However, with the UK’s own storage capacity limited to just a few days’ supply, it relies heavily on Europe’s reserves for backup.

This year, European storage facilities have dropped well below standard safety thresholds, raising concerns about the continent’s ability to weather further supply shocks.