2023 was a major year for natural gas with the U.S. jumping ahead of Australia and Qatar as top global Liquefied Natural Gas (LNG) supplier. The U.S. is also the world’s largest LNG exporter due to shipments via pipeline. Exports from the U.S. have been largely dictated by the capacity of LNG facilities, which aggregate, treat and refrigerate natural gas down to a temperature of minus 260 degrees Farenheit where it becomes a liquid. The technology involved in LNG export terminal development is more complex than that for crude oil or refined products and typically takes three to five years for construction.

New facilities are slated to come online in the next few years, contributing to expectations of higher exports. Shell’s LNG Outlook 2024 forecasts that U.S. LNG will make up 30% of global demand by 2030. The timing, however, is uncertain. According to S&P Global Commodity Insights, new capacity additions are not expected to materialize until the end of the year. Slippage in these timelines could limit any export growth until 2025. The recent U.S. government moratorium on new LNG export permits creates uncertainty over how long the uptrend will last.

U.S. Liquefied Petroleum Gas (LPG) made a splash on the world stage back at the start of the shale boom, paving the way for the U.S. to become a major supplier long before crude oil exports were permitted. LPG refers to natural gas liquids (NGLs) propane and butane, which are primarily coproducts of natural gas production. In addition to their well-known uses for grilling and lighter fluid, LPGs are used as feedstock for the production of ethylene and propylene as well as for heating and cooking in developing parts of the world. The U.S is the largest supplier of propane and butane, exporting two million barrels per day in 2023 – more than twice the volume consumed domestically.

Similar to LNG, LPGs need to be cooled to low temperatures before loading onto vessels. The existing LPG export facilities, which are mostly located on the Texas coast, have been operating at high utilization rates. Midstream operators Targa, Enterprise and Energy Transfer have announced LPG export capacity expansions to become operational in 2025. Until then, Houston Ship Channel’s decision to allow for nighttime transit is expected to be a regulatory tailwind for higher LPG exports.

The prices of U.S. natural gas, LPG and crude oil have been consistently below international equivalents for the last several years. Price spreads in excess of shipping costs encourage growth in export volumes. Spreads significantly in excess of shipping cost, such as those seen between Henry Hub and Dutch TTF natural gas in much of 2022, can reflect insufficient infrastructure to connect the two markets.

In times like this, international buyers who have already secured access to U.S. supplies may benefit from lower prices. Domestic producers or traders who have invested in physical infrastructure to deliver product overseas may also benefit from the arbitrage opportunity. 

Active futures and options markets for these prices at CME Group allow producers, consumers and traders to manage risks around cargo movements and export infrastructure investments.

U.S. energy exports could set new records in 2024 despite some of the near-term headwinds facing the industry. Data from satellite ship-tracking firm and cargo-movement expert Vortexa showed a record monthly volume of crude and condensate exports from the U.S. Gulf Coast in February 2024, totaling 4.56 million barrels per day. Exports of propane and butane were also up 15% year on year in February. This growth is likely to continue drawing international participants to the U.S. for energy supplies and price discovery.