Europe’s natural gas prices jumped Thursday after one of the US’ largest liquefied natural gas (LNG) export terminals experienced an explosion on Wednesday and has been shut down. A large share of the terminal’s LNG has been destined for Europe as the continent weens off Russian supplies.

Been in the Freeport area all day for an “incident” at LNG facility on Quintana Island. Freeport PD and witnesses say no doubt about it: it was an explosion. 💥 The fire/release has been contained and employees are accounted for. Investigation underway. pic.twitter.com/8wuGEGazb2

— Erica Simon (@EricaOnABC13) June 8, 2022

According to Bloomberg, the Freeport LNG export terminal in Texas will be shuttered for at least three weeks, which will impact 20% of all US LNG exports. In the last four months, 75% of all US LNG exports have been sent to Europe. 

“In the last three months, 68% of all Freeport cargoes were delivered into European markets,” said Tom Marzec-Manser, head of gas analytics at ICIS. 

Ole Hansen, head of the commodity strategy at Saxo Bank A/S, said the situation at Freeport has upended European gas markets after “calm trading seen in recent weeks.” 

Dutch front-month gas, the European benchmark, traded as high as 16% before giving up some gains and trading at 84 euros per megawatt-hour.

After the reports of the explosion, it was noted that US natgas was sold due to export halt fears would build supplies on the domestic grid; inversely, EU natgas would soar because of a decline in export shipments. 

For those puzzled by the price action, US NatGas’s slump is in response to the prospect that fewer LNG exports would mean more supply domestically, though inversely, it would mean higher prices in Europe since the US has been increasingly sending LNG across the Atlantic to ween European countries off Russian supplies.

Since the incident at Freeport, US natgas prices have plunged 15%. 

Analysts at Houston-based energy firm Criterion Research said, “very little information is known about the extent of the damage and how long it will take to repair.”