Natural Gas: Russian Control Has US Bulls Biting!

| March 26, 2014 | 0 Comments

Ukraine conflictSomething very interesting is happening in the natural gas market. The commodity rose by just over 3%, to $4.40 mmBtu, in yesterday’s trading session.  It was the first positive trading day for natural gas in just over a week.

But this time it wasn’t a looming onslaught of cold weather that sent this market higher. 

Instead, it was the situation in Ukraine…

As you’re likely aware, Russia has invaded the Crimean Peninsula of Ukraine.  It has been, and still is, a volatile and potentially dangerous situation.  Voters in the former Soviet Republic passed a referendum to rejoin the Russian state.  As a result, Russian President Vladimir Putin is annexing the peninsula.

What does that have to do with natural gas?

Europe is heavily dependent on Russian supplies of the commodity.  In fact, Russia provides nearly 25% of the gas consumed in the European Union. 

But for Eastern European nations like the Ukraine and Lithuania, the dependency is much higher.  Lithuania is completely reliant- getting 100% of its gas supply from Russia.

That’s why Lithuania, along with a handful of other Eastern European countries, is in Washington DC this week.  They’re asking the US Senate for help.  Lithuania’s energy minister, Jaroslav Neverovic, testified in front of the Senate Energy and Natural Resources Committee, proposing the US speed up its plan for LNG exports.

Neverovic says his country pays 30% higher natural gas prices than other European nations.  But if the US were to come into the European market, it would weaken Moscow’s energy grip.

As you may know, the US already has plans to export natural gas to Asia…

In fact, the first US LNG export facility at Sabine Pass, Louisiana is scheduled to go into operation in late 2015.  All told, there are seven export facilities that have gained approval from the US Department of Energy (DOE).

However, 23 remaining proposed LNG export facilities have yet to receive the necessary DOE permits.   And that’s why Neverovic and other European energy officials are in the US, supporting HR6. 

HR6 is a bill that would grant permits to all 23 remaining candidates “without delay or modification”.

If the bill passes, it would speed the timeline in which Europe could gain access to American natural gas.  What’s more, it will virtually guarantee US natural gas demand soars through the roof in coming years. 

And that’s why prices jumped higher in yesterday’s trading session…

No doubt about it, countries from all over the world want access to America’s plentiful natural gas supply.  And thanks to the Ukrainian crisis, that day may come a little sooner than everyone thinks.

Stay tuned to Commodity Trading Research.  In coming weeks, we’ll be talking more about America’s plan to export natural gas.  Is it a good idea?  And more importantly, how can you profit from the situation?

Until Next Time,

Justin Bennett

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Category: Natural Gas

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.