Snow covered transfer lines leading to storage tanks at the Dominion Cove Point Liquefied Natural Gas (LNG) terminal in Lusby, Maryland, March 18, 2014. REUTERS / Gary Cameron / File Photo

Sept. 17 (Reuters) – A trade group of manufacturers on Friday urged the Energy Department to order U.S. liquefied natural gas (LNG) producers to cut exports, warning of price increases and shortages of supply this winter.

Natural gas prices have jumped this year due to strong global demand and modest increases in production in the first half of the year. The call for U.S. natural gas more than doubled prices, with exports up 41% from a year ago. US gas was trading around $ 5.22 per million British thermal units (mmBtu) on Friday, up from $ 2.54 mmBtu in January.

Industrial Energy Consumers of America (IECA), a trade group representing manufacturers of chemicals, foods and materials, said US prices should rise to $ 10 per mmBtu to encourage producers to pump more gas and bring back stocks at historic levels.

US utilities have stored less gas than normal for the winter heating season, when fuel demand peaks. US inventories are 7% below the five-year average for this time of year.

However, an LNG trade advocate said gas exports did not hurt U.S. consumers and the majority of buyers had fixed contracts with prices well below the spot rate.

“What we have seen and proven time and time again is that the price of natural gas has not been adversely affected by LNG exports,” said Charlie Riedl, executive director of the Center for Liquefied Natural Gas.

The ICEA has called on the Department of Energy to freeze permits for new LNG export plants and order producers to reduce their shipments until US inventories increase.

“The LNG buyers who compete for natural gas with US consumers are state-owned enterprises and utilities controlled by foreign governments with automatic cost shifting,” said Paul Cicio, president of IECA. “American manufacturers cannot compete with them on price.”

Soaring natural gas prices have forced one of the world’s largest fertilizer producers, CF Industries (CF.N), to close two factories in the UK and Yara in Norway (YAR.OL) to reduce its European production of ammonia. Read more

Report by Rithika Krishna in Bangalore

Our Standards: The Thomson Reuters Trust Principles.

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