[ARCHIVE] Make Your Move

Trouble between EU and Russia Fails to Create Market for US Natural Gas

May 29, 2014

Investors high hopes of a quick return based on massive natural gas exports to Europe have been severely disappointed as the trouble between the EU and Russia over Ukraine has not produced a market for US natural gas.

Alan Beaulieu Blog

There have been hopes that troubles between the EU and Russia over Ukraine would produce a market for US natural gas, most likely in the form of LNG. We have been skeptical of that from the beginning of the crisis, stating that the Russian oil and gas will flow through the Ukraine pipelines because Russia needs the hard currency generated from energy exports. That is indeed what is happening. In fact, shipments are up year-over-year. Investors in hopes of a quick return based on massive exports to Europe have been severely disappointed.

Storage levels are healthy inside Europe at 57 percent of capacity. In addition, the gas is flowing by ship and pipeline, and the world is a relatively calm place at the moment. US and European firms should expect affordable natural gas prices which will help hold down inflationary pressures and aid in cash flow through the rest of the year.

Natural gas prices in Europe have fallen to three-year lows, and that means new Europe-based natural gas development projects are not likely to flourish in the current environment either. High-pressure fracturing technology and equipment suppliers should not expect a surge in sales this year.

Russia inked a deal to supply China with 38 billion cubic meters of gas annually. This is not expected to have an impact on prices out of Russia, and thus a negative impact on Europe, given that it is a relatively small amount in comparison to the 170 billion cubic meters currently shipped from Russia to Europe.

About the Author

Alan Beaulieu Blog | President

One of the country’s most informed economists, Alan Beaulieu is a principal of the ITR Economics where he serves as President. ITR predicts future economic trends with 94.7% accuracy rate and 60 years of correct calls. In his keynotes, Alan delivers clear, comprehensive action plans and tools for capitalizing on business cycle fluctuations and outperforming your competition--whether the economy is moving up, down, or in a recession.

Since 1990, he has been consulting with companies throughout the US, Europe, and Asia on how to forecast, plan, and increase their profits based on business cycle trend analysis. Alan is also the Senior Economic Advisor to NAW, Contributing Editor for INDUSTRYWEEK, and the Chief Economist for HARDI.

Alan is co-author, along with his brother Brian, of the book MAKE YOUR MOVE, and has written numerous articles on economic analysis. He makes up to 150 appearances each year, and his keynotes and seminars have helped thousands of business owners and executives capitalize on emerging trends.

Prior to joining ITR Economics, Alan was a principal in a steel fabrication company and also in a software development company.