Natural Gas: In Demand With Consumers, Out Of Favor With Investors

What about Europe? Fuhgeddaboudit!

That’s the domain of Russian energy giant Gazprom (OTC: OGZPY). With shades of Saudi Arabia, Gazprom has already dropped not-so-subtle hints about starting a natural gas share war in Europe with U.S. LNG exports.

Gazprom has the world’s largest natural gas reserves and is one of the lowest-cost producers. It has the most spare capacity (about 100 billion cubic meters) in the marketplace. That’s roughly equivalent to 25% of its output and about 3% of global production. So, like the Saudis, it is very capable of carrying on a “war.”

Estimates are that it would only cost Gazprom about $25 billion over the next five years to price U.S. LNG out of the market and win the “war.” That’s terrible news for the likes of Cheniere Energy (NYSE: LNG).

The president of a Japanese utility joint venture, Yuji Kakimi, assessed the LNG market for the Financial Times. He said, “My view is at least until the middle 2020s, a large amount of LNG will wander around the world seeking its final consumer.”

For me, that means the U.S. glut in natural gas is not going away anytime soon. That makes the entire sector an avoid for a very long time.

This article is brought to you courtesy of Tony Daltorio from Wyatt Investment Research.

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