News

Latest News

Stocks in Play

Dividend Stocks

Breakout Stocks

Tech Insider

Forex Daily Briefing

US Markets

Stocks To Watch

The Week Ahead

SECTOR NEWS

Commodites

Commodity News

Metals & Mining News

Crude Oil News

Crypto News

M & A News

Newswires

OTC Company News

TSX Company News

Earnings Announcements

Dividend Announcements

Trump's Trade Strategy Fuels Unexpected Energy Boom

When President Donald Trump was on the campaign trail, he threatened the biggest trade partners of the U.S. with 25% tariffs unless they did something about the surplus they were running with the U.S. Analysts said this idea was risky. Now, Bloomberg has reported that the idea, while not exactly elegant, is already working.

Asian energy importers are seeking more crude oil and LNG cargos from the United States, the publication wrote as the 47th president was being sworn in. The goal is to appease Trump before he does something even more painful than tariffs.

“Trade partners see buying US LNG as aiding in tariff negotiations with the Trump administration,” energy analyst Saul Kavonic from MST Marquee told Bloomberg, adding that there has been a jump in orders for U.S. energy cargos since last November’s election.

Soon after the election, Trump specifically suggested that the European Union should buy more U.S. LNG to make up for a huge trade surplus with the States. At the time, European Commission president Ursula von der Leyen said she saw no reason why the EU couldn’t stop buying Russian LNG and replace it with U.S. LNG. It was probably not one of her most observant remarks.

The reason that the EU is buying so much Russian LNG—record volumes, even this year—and is reluctant to buy more U.S. LNG is the price. This is what would make it challenging for EU buyers to follow in the footsteps of their Asian colleagues and boost their purchases of U.S. liquefied gas. As the Financial Times reported earlier this week, the European Union is highly price sensitive or, as one EU official put it, “The price issue is a delicate and decisive one.”

Right now, however, the EU is indeed buying more U.S. liquefied gas because its gas storage is melting like snow, and demand is still high due to the season. Reuters reported earlier this week that no fewer than six LNG cargos have been diverted from their original routes to Asian destination and sent to Europe. And Europe is paying a premium for these cargos while Asian buyers demonstrate their own price sensitivity.

“The diversions are happening because Asian prices aren't keeping enough of a premium to European prices to attract cargoes,” the head of LNG pricing at Argus, Martin Senior, told Reuters.

Now, on his first day as president, Donald Trump canceled the Biden “pause” on new LNG export capacity so there will be more of that coming in the next four years. This would increase available supply and may reduce prices—depending on demand. But Europe has a tough act ahead of it: balance between its ambition to reverse the decline in its competitiveness by reducing energy costs and pleasing the president of the United States by buying more American oil and gas—both of which come at a premium for European buyers compared to geographically closer alternatives.

Asia, meanwhile, is in a better position due to its relative proximity to the United States. However, analysts have pointed out that even Asian buyers would not be able to boost their purchases of U.S. oil and gas too quickly and too substantially because of one thing: long-term contracts. Yet it is long-term contracts that can give a boost to U.S. oil and gas growth if buyers from the country’s big trade partners decide to lock in future supply under new long-term deals.

In both cases, the tariff threat already seems to be doing the job Trump intended it to do, at least when it comes to Asian and European trade partners of the U.S. As for Canada, the President has repeated his threat of 25% tariffs on both U.S. neighbors, beginning February 1st. Canada’s response was that it was “working on retaliation” if push comes to shove.

By Irina Slav for Oilprice.com