Shares of major U.S. liquefied natural gas (LNG) developers surged on Monday morning following the announcement of a sweeping trade agreement in which the European Union agreed to buy $750 billion worth of LNG from the United States over the next three years.
The framework deal, unveiled Sunday, commits the EU to annual purchases of $250 billion in U.S. LNG, as the bloc continues efforts to wean itself off Russian energy supplies. The move is expected to strengthen the position of American LNG exporters amid rising demand for alternative fuel sources.
NextDecade (NASDAQ:NEXT), Venture Global, and Cheniere Energy (NYSE:LNG) saw their shares climb between 7% and 8.8% in premarket trading, reflecting optimism about future growth and capacity expansion.
The United States overtook Australia and Qatar in 2023 to become the world’s largest LNG exporter, benefiting from heightened demand and market volatility triggered by Russia’s invasion of Ukraine in 2022, which disrupted global supply chains and led to sanctions.
In exchange for the long-term energy commitment, the EU will face a 15% U.S. import tariff on most goods, a figure that was notably lower than earlier speculation.
“Terms of the EU-U.S. trade deal were at the forefront, with the 15% tariff level better than feared (30% was mooted previously),”
said Ashley Kelty, analyst at Panmure Liberum.
“This should see less of a drag on industrial activity between the two.”
However, Kelty also warned the agreement could create pressure in the energy markets:
“The demand for the EU to buy more U.S. energy will see more U.S. LNG imports in the future,”
she said, suggesting a possible oversupply that could push gas prices lower.
Smaller U.S. gas producers also benefited from the news, with Expand Energy and EQT Corp (NYSE:EQT) rising 1.6% and 3%, respectively, ahead of the market open.
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