Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Dow Stock Market Dow Trend Forecast Current State - 22nd Apr 21
Gold Rebounds Amid Positive Economic Reports - 22nd Apr 21
China's record first quarter fuels strong expansion in 2021 - 22nd Apr 21
Gold Price Next Key Level - 22nd Apr 21
Here's What to Look For When Hiring a Real Estate Agent - 22nd Apr 21
Ethereum EIP 1559 and Raven Coin - 21st Apr 21
Gold, USDX: The Board is Set, the Pieces are Moving - 21st Apr 21
World Economies Need to Find a Lot More COPPER! - 21st Apr 21
DogeCoin CRASH! Time to Start Mining BOODGIE Coin! Crypto Mania 2021 - 21st Apr 21
Pausing Stocks and Gold Fireworks - 21st Apr 21
Precious Metals and Miners Start of New Longer-Term Bullish Trend - P2 - 21st Apr 21
Looking For A Mortgage Broker? Here Is How To Hire One - 21st Apr 21
Amazon AMZN Stock PRIMEDAY SALE! Trend Analysis - 20th Apr 21
Stock Market Sentiment Speaks: You May Not Believe My 2021 Targets - 20th Apr 21
Stock Market Phase Two Projection - 20th Apr 21
Are Precious Metals & Miners Starting A New Longer-Term Bullish Trend? - 20th Apr 21
Inflation: First the Gain, Then the Pain… - 20th Apr 21
8 Stock Market Indicators in 1: Here's the Message of the Panic/Euphoria Model - 19th Apr 21
Gold - You Can Win a Battle, but Still Lose the War - 19th Apr 21
Will Interest Rates Rally Further Push Gold Price Down? - 19th Apr 21
Gold Fireworks Doubt the Official Inflation Story - 19th Apr 21
YuanPay Team Discuss The Process Of Crypto Diversification - 19th Apr 21
Central Banks May Ramp Up Gold Buying - 18th Apr 21
How to Get Rid of Driveway Weeds With Just WATER! 6 Months later NO Weeds, Ultimate Killer! - 18th Apr 21
State of the European Markets - DAX, FTSE, CAC, AEX, SMI, IBEX 35, S&P/MIB, Euro Stoxx 50, RTS - 18th Apr 21
Einvestment Fund: What You Need To Know About Investments - 18th Apr 21
Google Alphabet (GOOG) AI Deep Mind Stock Trend Analysis - 17th Apr 21
Stocks and Bonds Inflationary Slingshot - 17th Apr 21
Best Smartphone Selfie Stick Tripod Review by ATUMTEK Works with Samsung Galaxy and Iphone - 17th Apr 21
How to Give Budgie's First Bath | Easy Budgie Bathing and Water Training with Lettuce - 17th Apr 21
Record-breaking Decrease in New Passenger Vehicle Sale in Europe - 17th Apr 21
US Stocks Climb A “Wall Of Worry” To New Highs - 16th Apr 21
Gold’s Singular Role - 16th Apr 21
See what Anatomy of a Bursting Market Bubble looks like - 16th Apr 21
Many Stock Market Sectors Are Primed For Another Breakout Rally – Are You? - 16th Apr 21
What Skyrocketing US Home Prices Say About Inflation - 16th Apr 21
Still a Bullish Fever in Stocks? - 16th Apr 21
Trying to Buy Coinbase Stock on IPO Day - Institutional Investors Freeze out Retail Investors - 15th Apr 21
Stocks or Gold – Which Is in the Catbird Seat? - 15th Apr 21
Time For A Stock Market Melt-Up - 15th Apr 21
Stocks Bull Market Progression Now Shows Base Metal Strength - 15th Apr 21
AI Tech Stocks Buy Ratings, Levels and Valuations - 14th Apr 21
Easy 10% to 15% Overclock for 5600x, 5900x, 5950x Using AMD Ryzen Master Precision Boost Overdrive - 14th Apr 21
The Current Cannabis Sector Rally Is Pointing To Another Breakout - 14th Apr 21
U.S. Dollar Junk Bond Market The Easiest Money in History - 14th Apr 21
The SPY Is Nearing Resistance @ $410… What Is Next? - 14th Apr 21
The Curious Stock Market Staircase Rally - 14th Apr 21
Stocks are Heating Up - 14th Apr 21
Two Methods in Calculating For R&D Tax Credits - 14th Apr 21
Stock Market Minor Correction Due - 13th Apr 21
How to Feed Budgies Cucumbers - Best Vegetables Feeding for the First Time, Parakeet Care UK - 13th Apr 21
Biggest Inflation Threat in 40 Years Looms over Markets - 13th Apr 21
How to Get Rich with the Pareto Distribution - Tesco Example - 13th Apr 21
Litecoin and Bitcoin-Which Is Better? - 13th Apr 21
The Major Advantages Of Getting Your PhD Online - 12th Apr 21
Covid-19 Pandemic Current State for UK, US, Europe, Brazil Vaccinations vs Lockdown's Third Wave - 12th Apr 21
Why These Stock Market Indicators Should Grab Your Full Attention - 12th Apr 21
Rising Debt Means a Weaker US Dollar - 12th Apr 21
Another Gold Stocks Upleg - 12th Apr 21
AMD The ZEN Tech Stock - 12th Apr 21
Overclockers UK Build Quality - Why Glue Fan to CPU Heat sink Instead of Using Supplied Clips? - 12th Apr 21 -
What are the Key Capabilities You Should Look for in Fleet Management Software? - 12th Apr 21
What Is Bitcoin Gold? - 12th Apr 21
UK Covd-19 FREE Lateral Flow Self Testing Kits How Use for the First Time at Home - 10th Apr 21
NVIDIA Stock ARMED and Dangeorus! - 10th Apr 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

The Ukrainian Shadow on the Energy Markets

Commodities / Energy Resources May 02, 2014 - 09:36 AM GMT

By: Money_Morning

Commodities

Dr. Kent Moors writes: I’ve spent the last two days in Baltimore, hammering out the details on my next big project. So stay tuned, there are some exciting new opportunities headed your way very shortly.

However, before heading out of town, I was scheduled to do an interview with CNBC Asia. Given the time difference, that meant I needed to be in a Baltimore studio at 1 o’clock in the morning. The show was live from Singapore.


But it didn’t go off as planned. A studio snafu prevented the interview, which left me with mixed emotions. I was happy about the extra rest, but it came at the expense of continuing an important conversation with an audience half way around the world.

Much like my discussion on Chinese television a few days ago, this one involved the crisis in Ukraine and what it means for global energy markets.

Only this time, the focus was to go beyond the impact it’s having on European natural gas and delving into what it means for Asia.

Of course, the interview didn’t happen, but there is no reason I can’t tell you what I would have said.

The impact is much bigger than you think…

The Ukrainian Shadow on the Energy Markets

It all stems from what I call the rising specter of global uncertainty. It contains three overarching components.

First, geopolitical tensions and uncertainty have a way of unnerving regional markets worldwide whether the focus of the unrest is located in the particular market or not.

What is happening in Ukraine has an effect on places like Singapore…or New York…or Buenos Aires, even though these markets have little direct relation to Ukrainian energy needs or gas flows between Russia and Europe.

That’s because we now live in an integrated global energy market. Whether one is a net importer, exporter, price maker or price taker, events like this – no matter where they occur -have an effect.

Think of the energy market as a giant inner tube…

Assuming there are no leaks and you have an air bubble somewhere in the tube, pushing it down will only cause it to appear someplace else.

Basic elements of supply, demand, availability, and the ability to transit energy from place to place ripple throughout the integrated system. Prices simply have a way of reflecting the weakest or most unstable link in that system.

When it comes to estimating availability, having ample domestic sources of raw material – oil and gas – emerges as the best protection from the immediate volatility in the global market. But, aside from a major dislocation worldwide, even that is not always guaranteed.

And it does not protect against a spike in prices.

The average consumer may equate the price to what it costs to fill up at the neighborhood service station, but the price is actually a function of the broader market trade.

It is demand in places like Asia and across the developing world that drives this market, not the needs of established industrialized regions like North America or Western Europe.

That brings us back to how the Ukrainian crisis figures in all of this. The crisis is currently the biggest “bubble” globally, providing the most pronounced pressure on natural gas prices along with a knock-on effect on crude.

This doesn’t mean as the ebb and flow of the crisis unfolds that each event will have an immediate effect on prices. But it does mean that traders, producers, and end-users will keep an eye on events as energy exchanges progress.

Russian tanks and armored personnel carriers moving across the Ukrainian border or a disruption in gas deliveries to Europe across Ukraine would result in an immediate spike in prices. But it is the uncertainty of the situation that has the market unnerved.

The result of that is felt worldwide.

The LNG Revolution Gathers Steam

Second, there are medium term results in the direction and balance of trade.

Even without knowing how the crisis will be resolved or how long it will take to reduce tensions, two conclusions are already apparent – Russia will be looking to increase the transit of gas to Asia; and liquefied natural gas (LNG) will become a significant new balancing agent in the global market.

The Russian move toward Asia will result from the rising level of acrimony between Moscow and Brussels (both headquarters to the European Union and NATO). Europe has already been diversifying its energy sources to become less dependent on Russia. That will now be intensified.

Gazprom, Russia’s huge natural gas behemoth, will find it increasingly difficult to sell more gas to the EU. That increasing volume is essential for the Russian budget, leaving a move of the gas to the east as the only realistic alternative.

As for the LNG component, elements I have mentioned in OEI before will now become even more paramount. Accelerating LNG trade internationally will allow nations to be less dependent on pipelined imports.

The LNG will also allow for the development of local spot markets and those markets will serve to stabilize and restrain prices no longer based only on gas moving on foreign-controlled pipes.

The LNG revolution was coming anyway. But the geopolitical uncertainty revolving about Ukraine has simply expedited its arrival.

A Big Win in the “New Cold War”

That leads us to the final observation I would have made earlier this morning. As that LNG trade intensifies, it will be U.S.-based volume that will figure most prominently in the balance that is unfolding.

Those exports will not begin for a least another year, but when they begin, natural gas prices in both Asia and Europe will progressively come under the influence of the U.S. largess in unconventional gas production.

The Russian-Ukrainian crisis is simply providing a central position for American energy trade moving forward. That trade will result in greater reliance by both continents on the U.S. as an energy balancing factor. It will also result in better, more predictable pricing in Asia and act as a counterweight to the increasing Russian exports via pipelines into the region.

That’s hardly what the Kremlin had in mind when the situation in Crimea and Eastern Ukraine unraveled.

For Asia, a crisis elsewhere in the world is now providing an opportunity for better energy availability at home. But the new market will be driven by Russian gas coming by pipeline and US LNG ferried in by tanker.

And that may just transport this new version of the Cold War to a whole different part of the world.

Source : http://oilandenergyinvestor.com/2014/05/specter-global-uncertainty-means-asia/

Money Morning/The Money Map Report

©2014 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules