Global gas and LNG market participants await clarity on president-elect Donald Trump's course of action once he takes office in January, as the net impact of some of its stated policies remains difficult to gauge.
Price movements in recent days show little evidence of a market reaction to the outcome of the election. Prompt and near-curve LNG prices for delivery to Europe and Asia have risen, mostly tracking the increase in European hub prices. But the change in euro-denominated hub prices appears largely unrelated to the jump in the value of the US dollar that followed Trump's win.
The dollar index, which measures the dollar against a basket of six other currencies, has rallied since Trump's victory became apparent, reaching a two-year high on 13 November. The US currency was worth over €0.95 on Wednesday, up from €0.91 on polling day. This might have contributed to stronger European hub prices, albeit only slightly.
Exchange rates aside, the election result was never likely to have a serious short-term impact on the LNG market.
The halt to Russian gas flows through Ukraine at the end of this year, when transit and interconnection agreements between Moscow and Kyiv expire, is the variable with the most disruptive potential for European gas markets that are much more reliant on LNG since Russia launched its full-scale invasion. But a shift in US policy would not be able to exert influence on any negotiations — which remain hypothetical at present — aimed at extending gas flows through Ukraine, given that Trump is only due to take office in late January.
But Trump's policies might from next year affect the LNG market. US LNG producers have expressed mixed feelings about the consequences of a second Trump administration, with a dividing line emerging between firms that already export LNG and those that want to build new export facilities. Forward gas prices at the Dutch TTF hub also appear to show a mixed picture, with contracts for delivery next year and in 2026 rising broadly in line with the near curve, while prices for delivery in the following two years have held broadly stable.
Operators of existing liquefaction facilities were wary of Trump's enthusiastic endorsement of protectionist policies, which they fear could trigger another trade war with China. The president-elect has pledged to impose a 20pc tariff on all imports — except those from China, which will instead be subject to 60pc. The possibility of Beijing following suit with retaliatory tariffs on US LNG— as in 2018-19, during Trump's first term — concerns many market participants.
Trump's trade war with China in 2018-19 was widely seen as detrimental to development of the industry, as it hampered trade between the largest incremental producer and consumer. But the nature of most US LNG contracts — predominantly based on free-on-board delivery — reduced the short-term impact. While physical deliveries to China did vanish in 2019, no US LNG exporter reported cancellations that year, with cargoes simply resold elsewhere or swapped with LNG from other countries.
The re-emergence of similar trade disputes from next year could force another reconfiguration of trade flows, possibly facilitated by the fact Europe is now a much larger LNG importer than in 2018-19, when it was heavily dependent on Russian pipeline gas. Physical deliveries of US LNG to China fell sharply in 2022 and have still been at less than half their 2021 peak this year (see chart). But while higher than six years ago, Europe's LNG demand has not pushed beyond 2022's record, and the amount of US LNG in Chinese portfolios is also much larger.
On the other hand, developers of new US liquefaction facilities have pinned their hopes on Trump's pledge to reverse the Biden's administration licensing pause, which froze projects and in some cases lost them contracts. But speeding up project approvals could result in a much more amply supplied market later in the decade, when a swathe of new facilities are already due on line (see chart) Industry figures have suggested the [LNG market could be oversupplied as early as 2028](https://direct.argusmedia.com/newsandanalysis/article/2493845.
The greatest uncertainties are related to how Trump deals with the conflict in Ukraine. He has boasted he would end the war on his first day in office — overly optimistic at best. But even if his administration could bring about a swift end to the conflict, a full normalisation of relations between Russia and Ukraine is difficult to imagine. Nevertheless, a relaxation of US sanctions — including those targeting Russia's existing 19.8mn t/yr Arctic LNG 2 terminal — could be an initial bargaining chip and might result in an immediate increase in supply.
