What is the Eurodollar Market?
The most important and least understood driver of global financial markets.
Natural Gas and LNG markets are top of mind for global geopolitics. What should we be aware of?
In 2020, natural gas prices declined to multi-year lows as the world shut down due to COVID-19. U.S. Henry Hub prices averaged $1.99/mmBTU – the lowest since 1995 – while Asian LNG prices declined to their lowest level on record ever. As a result, the EIA’s global outlook for 2021 concluded that “natural gas prices will remain low compared with historical levels.” The more venerable IEA was a little more circumspect, concluding that it would take until 2025 (at least) for natural gas demand to recover.
Instead, even before Russia invaded Ukraine, prices were already moving higher.
Where do we go from here?
Our brilliant friends over at Goehring & Rozencwajg think the answer is the latter, arguing persuasively in their Q1 2022 commentary that “The Gas Crisis is Coming to America,” which would have systemic global implications. Our other brilliant friend Marko Papic over at Clocktower Group concurs with G&R – international gas prices could go up “four-to-six fold.”
Before we can tackle what is going to happen next, however, we need to spend some time understanding how we got here. (What, you thought you’d get through a Jacob Shapiro piece without some historical context?) In particular, we need to understand the way that the Shale Gas Revolution and the LNG Revolution fundamentally changed global natural gas markets in the mid to late 2000s as what is happening in markets right now is intrinsically tied to the combination of those developments. An unstoppable object (the globalization of natural gas supply) is destined to crash into an immovable force (the geopolitics of energy security in a multipolar world) – and we all know I’m biased to say the latter will win the day.