🎧 Fickle trade war takes its toll on LNG demand

The US-China trade war has rewritten the macroeconomic outlook for 2025, and with it the global demand picture for liquefied natural gas (LNG).

Swingeing import tariffs could be lifted just as quickly as they were introduced. However, even a swift resolution at this stage would be unlikely to purge the bearish sentiment now dominating the European natural gas market.

This episode catches up on the many market-moving events of recent weeks, with a focus on disruption to energy trade, relaxation of the EU’s gas storage targets, and bearish factors weighing on the summer gas demand outlook.

In the reader Q&A, I fielded questions relating to my recent take on the shift to a new lower pricing regime, and the risks posed by a cratering price environment to customers buying US LNG.

I also share my thoughts on The New Joule Order, a thought-provoking essay from esteemed energy commodities analyst Jeff Currie.

The full transcript is included below.

Thanks for listening,

— Seb

P.S. Don’t forget to share your questions, thoughts and reactions for inclusion in the next episode. I prioritise input from paid subscribers 😉

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Episode transcript:

(00:00:19):

Hi there, and welcome back to Energy Flux On Air.

(00:00:23):

I'm your host,

(00:00:24):

Seb Kennedy,

(00:00:25):

founding editor of Energy Flux,

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the energy newsletter analyzing European natural gas and global LNG markets through

(00:00:34):

the lens of Europe's energy transition and global geopolitics.

(00:00:38):

It's been quite a while since my last episode.

(00:00:41):

I've been quite busy with the house move, transatlantic travel, Easter break.

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So apologies for those of you who have missed energy flux on air.

(00:00:50):

I've been dying to get back into the studio to talk over everything going on in

(00:00:53):

energy markets and the global geopolitical panorama.

(00:00:56):

And I finally found time and I'm hoping to get back onto a more regular recording schedule.

(00:01:02):

To give a measure of how much time has elapsed since the last episode,

(00:01:05):

the price of European gas traded on the Tidal Transfer Facility,

(00:01:10):

that's the TTF,

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the European benchmark,

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has dropped from more than 43 euros per megawatt hour on the 19th of March to less

(00:01:18):

than 32 euros at the end of last week.

(00:01:21):

That's a drop of more than a quarter in barely more than a month.

(00:01:25):

Since the last episode,

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we've had Liberation Day,

(00:01:28):

the start of a bitter Sino-US trade war with both sides seemingly entrenched,

(00:01:34):

a stock market shock,

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bond markets wavering,

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dollar devaluation and a rewriting of both the global macroeconomic script and the

(00:01:42):

security guarantees.

(00:01:43):

that underpinned 80 years of global trade since the Second World War.

(00:01:48):

So TTF settled on Friday below €32 per megawatt hour,

(00:01:52):

but that's the first time it's been that low in a year.

(00:01:55):

€32 is approximately $10.80 per MMBTU.

(00:02:01):

And that sell-off has,

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as usual,

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correlated quite strongly with a sell-off in hedge fund long positions.

(00:02:09):

The hedge funds that bet on the future price of TTF, as you'll recall, they had an eye-watering

(00:02:16):

net long position of 292 terawatt hours and that was in February when the price on

(00:02:24):

TTF was reaching for 60 euros per megawatt hour we've seen massive liquidations two

(00:02:30):

big sell-off periods in February and in April April of course being triggered by

(00:02:34):

the Liberation Day trade war which I mentioned at the start net position went from

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292 terawatt hours to just 86 terawatt hours

(00:02:42):

or a 15 billion euros long bet to a 5 billion bet.

(00:02:48):

So essentially the hedge funds have sold off 10 billion euros worth of length in

(00:02:54):

TTF futures since February.

(00:02:57):

But I don't think the sell-off has finished.

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And the reason I say that is because if you go back 12 months to when TTF was last

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trading at around