Pesky Supply and Demand Law Hinders Trump's European Gas Dream

(Bloomberg) -- The U.S. will become a massive seller of liquefied natural gas, but President Donald Trump’s “massive buyer” will likely be Asia, not Europe.

Trump made the comment about the U.S. supplying Europe with LNG after a meeting with European Commission President Jean-Claude Juncker in Washington on Wednesday. Barring Russia giving up its gas business on the continent or U.S. LNG sellers giving the fuel away, the laws of supply and demand will have more say where the LNG goes than the whims of politicians.

LNG consumption is growing fastest in Asia, which currently buys almost three-quarters of global supplies. Europe will need about 52 million tons of the fuel a year by 2025 while Asian countries will buy 325 million, according to Sanford C Bernstein & Co. New supply is coming from Australia and the U.S. and the destination of those shipments has been no surprise because it’s mostly gone to Asia.

Since the U.S. started exporting shale gas from the Gulf Coast in February 2016, just 29 cargoes have landed in the European Union. That compares with 373 tankers that have left Cheniere Energy Inc.’s Sabine Pass terminal in Louisiana alone, most of which went to higher-paying markets in Asia.

Here are three charts explaining why Europe won’t bring the U.S. gas riches, starting with the juggernaut facing American exporters: Russian pipeline gas, which dominates all other forms of the fuel.

Pesky Supply and Demand Law Hinders Trump's European Gas Dream

Many countries in Asia lack hydrocarbon resources and don’t have the cross-country pipeline networks that criss-cross Europe, so they have to rely on LNG. Asia will continue to be the top buyer of the shipped gas, and sellers will likely chase the demand, not the other way around.

Pesky Supply and Demand Law Hinders Trump's European Gas Dream

The rise of U.S. shale has already disrupted domestic natural gas and global oil markets, and there’s no doubt it will have an impact on LNG as the U.S. becomes a more prominent exporter. It’s this rise to the top three producers by 2020 that supports Trump and other U.S. policy makers to wade into global energy diplomacy. But there’s still a lot more gas out there. The U.S., Australia and Qatar will only make up about half the supply in 2020, according to Bernstein.

Pesky Supply and Demand Law Hinders Trump's European Gas Dream

©2018 Bloomberg L.P.