Natural Gas Exports And The Ukraine

It's not gonna happen like one might expect, but Breakout is reporting that some think that Putin is making it more likely that President Obama will approve natural gas (and maybe oil) exports. Changes to the export laws won't change in my investing lifetime, but there are plenty of loopholes and regulatory permissions already on the books that will allow increased exports of both.

Having said that, here is Breakout's outlook:

Eying an opportunity to stick it to Vladimir Putin, hawkish Republicans, and Democrats from energy-rich states are pushing the administration to loosen exports of natural gas for shipment to Ukraine and other countries dependent on Russia. Currently exports of natural gas are limited to countries that are free trade partners with U.S., but lawmakers see an opportunity for domestic energy producers to benefit, as well as put pressure on Russia.

Natural gas had an extreme run-up recently as cold weather boosted demand, however the commodity has cooled off in the last couple weeks. David Lutz of Stifel Nicolaus has been following the trade for years, and despite arguably bullish talk coming out from Washington recently, he doesn’t see the clean burning fuel taking off in the short term.

“We’re starting to see as we move closer and closer towards the spring” that nat gas is weakening price-wise, he says in the attached video. “Nat gas [was] down for the month of February, lost 30% in the past week, and the reason why? They’ve shifted from March deliveries to April deliveries.”

As usual, the headline is more exciting than the reality.

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A Note To The Granddaughters

I don't have time to expand on this -- maybe later. I honestly don't understand all the media hysteria over the "crisis" in the Ukraine. Yes, Putin did this unilaterally. But this was a handful of troops sent to protect his naval station in the Ukraine and to protect the Russian majority in the Crimean. Regardless of whether the US entered Germany (WWII), Japan, Korea, Vietnam, Kuwait, Iraq, Afghanistan, several Central American/South American countries over the past 75 years unilaterally or part of a larger coalition, the end result was the same: a huge number of American soldiers on foreign soil, most of which had no historical tie to the United States (I won't even get into the "Indian Wars").

The Crimean/Ukraine is a non-event for the US but it takes our mind off ObamaCare. Short term the market agrees with me: the market has had one of the best weeks ever. Oil moved higher today, but if this was truly a serious event threatening a major disruption in oil movement, the price of oil would have spiked.

Supporting this view from Yahoo!In Play:

Equity indices enjoyed a broad-based rally on Tuesday that sent the S&P 500 (+1.5%) and the Russell 2000 (+2.5%) to new record closing highs. Stocks surged out the gate after index futures received a considerable bid around 1:00AM ET.

The overnight strength came about after it was reported that Russian President Vladimir Putin called back the troops that were conducting exercises on the country's border with Ukraine. Mr. Putin commented on the tense situation, saying Russia is not aiming to annex the Crimean peninsula and that military force is a choice of last resort. The overnight developments were viewed positively by market participants who rushed into risk while shedding some of the safe-haven assets that were in strong demand on Monday.

On that note, Treasuries spent the entire session in a steady retreat with the 10-yr yield ending at its session high (+9 bps at 2.69%); gold futures fell 0.9% to $1337.80/ozt; and crude oil lost 1.6%, ending at $103.34/bbl. The risk rally translated into solid gains for all ten sectors.

This is simply turning into a UN-mediated diplomatic concern.