Prior to 2020, there was a strong global demand for liquefied natural gas (LNG). 2019 saw a 13% year-over-year increase in global LNG trade. Total sales hit 354.7 million metric tons. It was the sixth year in a row of LNG growth. Last year alone, the U.S. increased production by 13.1 million tons. But black swan events can happen at any time... and they sure are disruptive. Here's what's been transpiring in the natural gas space since the COVID-19 pandemic came on the scene... Massive Demand DisruptionThis past winter was mild and kept what would normally have been strong seasonal demand in check. Then the coronavirus happened. It was a classic black swan event. Global economic activity shut down. U.S. LNG exports plunged, spelling disaster for U.S. natural gas prices... Natural gas consumption in the U.S. is expected to drop 3.9% year over year to 81.9 billion cubic feet per day in 2020, according to the Energy Information Administration. One of the big culprits has been decreased industrial sector use. It's down 7.1% so far this year. This can be directly linked to lower manufacturing activity from stay-at-home orders. Low natural gas prices are keeping natural gas-only producers from drilling new wells. This is especially evident in the Marcellus and Utica shale formations. |
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