Natural gas prices surged across Europe on Thursday after a fire broke out at a key US export hub, putting further pressure on already tight global supply.
The Freeport liquefied natural gas export facility in Quintana, Texas will remain closed for at least three weeks after Wednesday's explosion, a company spokesperson said. The terminal accounts for nearly a fifth of all US overseas gas shipments, according to Bloomberg. The US supplies almost half of Europe's LNG.
UK natural gas futures surged around 33% to 172 pence per therm after the outage, while benchmark Dutch gas prices rose just under 12% to 88 euros per megawatt hour. Meanwhile, US Henry Hub gas futures fell just under 5% to $8.27 per MMBtu, as the outage would lead to a rise in domestic supply.
European gas benchmarks surged to all-time highs after Russia's invasion of Ukraine and continue to be highly volatile. UK and Dutch prices are up 143% and 200%, respectively over the past year.
Surging commodity prices have plunged Europe into a cost-of-living crisis, as fuel and utility bills have spiraled. UK consumer prices rose 7.8% in April, while eurozone inflation hit an all-time high of 8.1% in May.
"The impact on US gas prices has been bearish, given that this will weigh on LNG exports and leave more gas in the domestic market," ING strategists said. "This should prove supportive for European hub prices as well as spot Asian LNG prices, given that the LNG market is already tight, with Europe increasingly turning to LNG as it tries to reduce its dependency on Russian gas."
The EU relies on Russia for 40% of its domestic natural gas needs, with almost all of this total arriving in the region via pipeline. There are very few LNG ports in Europe, meaning that it will take some years to reduce this reliance.
No injuries or risks to the surrounding community arose from the explosion, according to Freeport LNG.