A major European energy trading company has redirected about 1 Bcf (28mn m³) of natural gas that was scheduled to flow across the US border into Canada to reduce the company's exposure to the threat of impending tariffs, a person with knowledge of the matter told Argus.
The trading company originally planned to flow about 30mn cf/d of gas from the US Midwest into Enbridge's Dawn storage hub in Ontario, Canada, every day in March. But the company has decided to cancel that contract and drop the gas off at another location in Chicago, Illinois, instead, because it did not think the slim profit margin of that trade was worth the risk of having to incur potential tariffs imposed by Canada in retaliation to President Donald Trump's threatened 10pc tariffs on energy products flowing across the border. Trump's tariffs are set to take effect on 4 March.
The canceled gas flows across the US-Canadian border illustrate the precautions some industry participants are taking to reduce their exposure to price uncertainty resulting from what appears to be a looming trade war between the close energy trading partners. Such precautions are being taken despite the fact that most analysts think the impact on gas prices and cross-border volumes from Trump's tariffs would be modest.
If the tariffs are not imposed and the cross-border trades in March are profitable, the European trading company may choose to resume the trade and send gas from the US into Canada on a daily basis, the person said.
Opting out of trades that risk tariff exposure is sometimes the most prudent decision, although it slows dealmaking, the person said.
The company is still doing deals that move gas from Canada south into the US Pacific Northwest, because those trades are profitable enough to offset the risk of potential tariffs.
