Winter Isn’t Coming, It’s Here… Is Your Portfolio Prepared?

Winter isn’t coming, it’s already here. 

We can’t say we weren’t warned about the coldsnap. Meteorologists were calling for major snowstorms to blanket parts of New York, Ohio, and Michigan well in advance of the weekend storms.  

If you were fortunate enough to not be traveling in the Great Lakes region for Thanksgiving, then you didn’t have to deal with the massive lake-effect snow that dumped over five feet of it on the ground. 

And yet, even though you didn’t have to dig yourself out of a mountain of snow, there’s a good chance you still felt the freezing temperatures — nearly three-quarters of the country can feel the bite of the arctic air. 

Well, so much for a mild winter.

Trust me, things could be worse… and they might be for some.

Last week, we talked a little bit about the most important source of energy during cold winters — natural gas. We don’t stress things too much here in the U.S., especially with the huge amount of cheap, plentiful supply of natural gas that is being extracted from beneath the ground. 

However, it’s going to be a much different story in Europe if things continue the way they have been. 

You see, Europe has been a bit spoiled from the previous two winters that turned out to be extremely mild. 

Normally, I wouldn’t even bat an eye at a cold winter… but the EU isn’t exactly acting normal lately. 

Remember, EU members decided to put all their eggs in one basket when it came to their energy sector via an incredibly aggressive transition towards renewables. To be clear, boosting solar and wind energy capacity ISN’T a bad thing — but it is if you do it while utterly destroying baseload power sources like coal and nuclear. 

Shuttering your coal and nuclear power tends can be a problem when all it left you with was a heavy reliance on Russia for its natural gas. 

Keep in mind that the last two consecutive winters is what saved the EU from a full-blown energy crisis. 

This year, things can deteriorate quicker than most people think, and temps are already slipping below the seasonal norms. Of course, we can’t forget that a few dunkelflaute events recently have made things even tighter. 

But hey, we’re told there’s no need for alarm. After all, Europe’s natural gas inventories were full to the brim heading into the 2024 winter season. 

Well, not exactly. 

Europe’s gas reserves are depleting quicker than expected because the wind isn’t blowing as much as usual lately. That’s okay, all is well because Europe can go ahead and keep on relying on the U.S. for LNG… right?

Thing is, they’re going to have to pay a lot more this year for their LNG because the supply-demand balance gets tighter as the temperature drops: 

In the past, we’ve highlighted certain U.S. LNG players like Cheniere Energy Partners (NYSE: CQP). After the pause put on new LNG projects earlier this year from the Biden administration, we know that there’ll be a delay to bringing more LNG from the U.S. to global markets. 

So, it’s no surprise that Cheniere is exporting more cargoes of LNG than ever before. 

But take a deeper look at this situation, and you’ll find even more opportunities opening up. 

In Germany’s case, one of the issues comes down to infrastructure. This winter, the country will bring two more LNG import terminals on-line. However, it won’t be enough, which means that they’ll be relying on temporary LNG terminals in the form of Floating Storage and Regasification Units — FSRUs. 

This certainly makes LNG players like Excelerate Energy (NYSE: EE) a bit more valuable heading into the heart of winter… and not to mention the fact that its fleet of FSRUs can not only take advantage of Europe’s rising LNG prices, but also Asia’s.