A recent trade agreement between the EU Commission and US leadership has set a challenging target for the EU, requiring it to purchase $750 billion worth of US energy goods within three years.
This commitment, alongside a new 15% import tariff on EU goods entering the US, raises significant doubts about the EU’s ability to meet the ambitious energy import goal, given current trade figures.
The three-year timeline corresponds to imports of $250 billion per year, or around $21 billion per month, according to Commerzbank AG.
Data from Eurostat reveals that the EU imported an average of EUR 31.8 billion worth of energy goods in total per month in the first quarter of this year, similar to the level of the first quarter of the previous year.
This aligns with a decrease in import volume, though at marginally increased prices, according to Carsten Fritsch, commodity analyst at Commerzbank AG.
“The share of imports attributed to the US was EUR 17.8 billion in the first quarter, which is around USD 7 billion per month — far from the required USD 21 billion,” Fritsch said.
Hence, it is highly doubtful that the EU will be able to fulfill the promised purchases.
Increase in LNG shipments
An increase in US LNG shipments appears to be the most plausible.
EU’s reliance on Russian LNG imports, which currently account for 17% of total EU LNG imports, is set to decrease.
These imports have historically made up 50% of total EU LNG imports. The EU plans to completely cease gas imports from Russia, creating room for increased LNG imports from other sources, particularly the US.
Despite this, the US may not fully bridge the financial gap created by the reduction in Russian imports.
Even if the US fully compensates for the loss of Russian LNG, it would only amount to just over $1 billion per month in additional imports from the US, according to Commerzbank.
Based on the first quarter’s values, if Russian LNG were entirely replaced by US LNG, it would result in only EUR 0.3 billion more in monthly imports from the US.
A significant increase in US gas prices or a substantial price premium of US LNG over Russian LNG would be necessary to achieve a more notable boost in Europe’s US imports.
The current “deficit” of $14 billion will not be covered by these expected changes.
This is noteworthy as previously Commerzbank had reported that the current level of Russian LNG imports already exceeds the additional US LNG exports anticipated by the EIA this year.
Coal
The outlook for US coal imports to the EU is particularly bleak.
The EU’s total coal imports were under $3 billion, with the US accounting for roughly 30% of this figure.
Compounding the challenge is the substantial drop in overall EU coal imports, which have more than halved since early 2023 (according to Eurostat quarterly data).
Consequently, a significant increase in imports from the US is improbable, especially given the anticipated decline in coal power within the EU in the coming years due to climate objectives, Fritsch said.
Petroleum oil imports constituted the largest share of EU energy imports in the first quarter, making up about 60%.
The US contributed roughly $10 billion, accounting for 15% of these imports.
Prospects for oil
The likelihood of the EU significantly increasing its imports of crude oil and oil products from the US in the future appears low,
From January to April 2024, US oil exports to EU countries averaged approximately 2.25 million barrels per day, according to the US Energy Information Administration (EIA).
At an oil price of $70, this volume translates to an annual value of $57.5 billion.
Of these exports, crude oil constituted nearly 1.6 million barrels per day, followed by natural gas liquids (NGLs) at 270,000 barrels per day, and diesel at 180,000 barrels per day.
While US crude oil exports to the EU have shown consistent growth over the past eight years, rising from 200,000 barrels per day, they currently represent almost 40% of total US crude exports.
“A further significant increase in US crude oil exports therefore seems unlikely, especially as US crude oil production is expected to stagnate until the end of 2026,” Fritsch said.
Diesel imports
Fritsch said:
There is, however, some room for improvement in diesel shipments.
While there is potential for improvement in diesel shipments, current levels are significantly lower than in previous years, such as 300,000 barrels per day in 2013.
However, a substantial short-term increase is unlikely due to very low US distillate stocks, which limit available diesel for export.
A significant expansion of US diesel production is also improbable, as refinery utilisation is already near full capacity at 95%.
Increased crude oil processing would further reduce crude oil available for export, thereby limiting the EU’s ability to increase imports of crude oil and oil products from the US.
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