U.S. natural gas producers and sector-related exchange traded funds could be capitalizing on the worsening energy crisis in Europe.
The First Trust Natural Gas ETF (NYSEArca: FCG) has increased 17.2% year-to-date.
As Europe suffers an energy crunch with dwindling supplies from Russia and the threat of further cuts from sanctions in response to a potential Russian invasion into Ukraine, European consumers have seen elevated natural gas prices for heating and generating electricity.
However, the surging prices have been a boon for American suppliers of liquefied natural gas (LNG) like Cheniere Energy Inc. and Cameron LNG, which are providing record amounts of LNG to starved European markets, the Wall Street Journal reports.
Europe’s gas crisis started in the fall and pushed up prices to record highs of over €180 ($205) per megawatt-hour on December 21 . Meanwhile, vessels carrying American LNG to global markets changed course for Europe in response to lucrative prices, and in December, the U.S. surpassed Qatar on a weekly basis to become the biggest global LNG exporter in the world for the first time. The U.S. has provided almost half of the record 11.7 million metric tons of LNG supplied to Europe, according to market-intelligence firm Kpler.
Meanwhile, the tensions over Ukraine have also put the light on Europe’s growing reliance on Russian energy pipelines, which are viewed as a crucial component to wean economies off dirty coal and cut carbon emissions while expanding their green energy sources.
“Russia doesn’t hesitate to use the significant energy supplies to Europe as a leverage for geopolitical gains,” EU High Representative Josep Borrell said after meeting U.S. Secretary of State Antony Blinken in Washington last week. “Our immediate priorities are to diversify the sources of energy, in particular the gas flows.”
Europe is also beginning to support the natural gas industry as a stopgap between dirty fossil fuels and renewable energy sources.
“For the buyers in Europe to feel like there’s policy support and political support to do long-term contracts for gas, that’s very positive,” Mike Sabel, chief executive of Venture Global LNG Inc., told the WSJ.
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