U.S. President Donald Trump’s possible 25% tariffs on imports from Canada and Mexico could raise U.S. natural gas prices at domestic hubs but seems unlikely to change gas flows significantly, Citi said in a note on Friday.
Canadian natural gas exporters are likely to pass on the impact of the proposed tariffs to downstream customers along the U.S. West Coast who lack alternative sources of supplies, the bank said.
It added that while Midwest and Northeast markets in the U.S. could potentially turn to supplies from Appalachia or the Rockies, they are more prone to price spikes if another cold wave hits these regions in February.
There will be no change to the flows along the U.S.-Mexico border as U.S. barely imports natural gas from Mexico, the bank noted.
Trump said this week that he was thinking of imposing duties on imports from Mexico and Canada from Feb. 1.
Citi also said that it remains optimistic on second quarter through the fourth quarter this year U.S. Henry Hub prices, given the rapid ramp-up of U.S. Liquefied Natural gas (LNG) exports and robust natural gas power generation.
Trump said on Thursday the U.S. would guarantee supplies of LNG to Europe, even amid worries that the booming export industry could boost prices of gas for U.S. consumers.
Meanwhile, UBS said that it sees a risk that natural gas prices could come under pressure in the near term, with weather forecasts pointing to milder temperatures for February.
On Friday, front-month gas futures for February delivery on the New York Mercantile Exchange were trading at $3.85 per million British thermal units.
(Reporting by Sarah Qureshi; editing by Philippa Fletcher)