In a year dominated by the coronavirus pandemic and upended at times by an historic hurricane season, leading natural gas marketers posted lighter sales volumes for full-year 2020, according to NGI’s Top North American Natural Gas Marketers ranking.
It marked the second consecutive year of lower overall levels. A global supply glut and weak prices weighed on volumes in 2019. Last year was defined largely by demand destruction imposed by virus outbreaks and necessitated production pullbacks in the spring.
A slew of storms that pushed into the Gulf Coast during last year’s record hurricane activity further interrupted U.S. natural gas production on several occasions over the summer and early fall. Hurricanes and tropical storms caused temporary but notable declines in output that delayed recovery from the curtailments producers put in place in response to the pandemic.
The 24 gas marketers included in the latest ranking reported combined average sales transactions of 116.98 Bcf/d for 2020.
The 22 gas marketers covered in the survey for which year-earlier data were available reported total sales transactions of 110.94 Bcf/d for the year, down 2% from the prior year.
Natural gas production in 2020 dipped year/year, U.S. Energy Information Administration (EIA) data show. Production fell alongside a drop in the U.S. rig count. The 2020 rig count reached a high of 793 on March 6, just prior to the pandemic last year, then plunged to a low of 244 by Aug. 14.
Production, as measured by gross withdrawal, averaged 111.2 Bcf/d in 2020, according to EIA, down 0.9 billion Bcf/d from 2019. The agency cited the pullback in drilling and the broader demand effects of the pandemic. The lowest average monthly U.S. natural gas production volume was in May 2020 at 106.4 Bcf/d.
BP plc (down 9%), Goldman Sachs subsidiary J. Aron & Co. (down 14%) and EDF Trading NA (down 9%) posted the steepest year/year declines among top 10 marketers. The biggest gainers in that group, meanwhile, were Shell Energy NA (up 5%) and Sequent Energy Management (up 8%.)
In the latest NGI rankings, 14 marketers reported lower 2020 figures than a year earlier.
Data for 4Q2020 told the same story, as NGI reported last month. Leading natural gas marketers in North America collectively reported lower sales volumes in the quarter, marking the sixth year/year decline over the last seven quarters, according to NGI’s 4Q2020 Top North American Natural Gas Marketers rankings. The flat result posted for 3Q2020 marked the lone exception.
With the pandemic still affecting daily life in the United States, the outlook for the first half of 2021 remains difficult to assess.
But optimism is mounting for 2021 overall, as production recovers, liquefied natural gas (LNG) export demand holds strong and forecasts call for a steamy summer and robust cooling needs.
Importantly, too, vaccination programs are gaining momentum and the domestic economy is steadily approaching a full reopening. When it gets to that point, analysts expect economic activity to mount. Commercial and industrial energy demand would like to accompany that trend, benefiting gas marketers.
“There are several layers of favorable expectations this year,” Thomas Saal, senior vice president of energy at StoneX Financial Inc., told NGI.
Rig counts have recovered ground to above 400. U.S. LNG feed gas volumes have held near or above 11 Bcf/d all spring – near record levels – according to NGI data. With demand from Asia holding strong and European stockpiles depleted after a long winter, analysts expect U.S. export activity to hold steady or even strengthen.
As new Gulf Coast export terminal projects come online in the second half of the year, RBN Energy LLC analyst Lindsay Schneider said LNG feed gas volumes could climb by another 1 Bcf/d before the end of 2021, bringing average deliveries to around the 12 Bcf/d level. With added capacity and with demand momentum expected to continue, she said export levels could top 13 Bcf/d next year.
“We expect feed gas volumes to stabilize at that level, at least for a few years,” Schneider said.
What’s more, the 2021 Farmers’ Almanac extended forecast calls for above average heat across about two-thirds of the Lower 48 this summer, with lofty temperatures to extend into September.
“While typically the hottest weather can be expected in late July or early August, this year’s summer heat could peak in late August, into early September,” the Almanac says.
The 2021 Canadian Farmers’ Almanac calls for above-normal summer temperatures across roughly two-thirds of that country, as well, with heat most pronounced in the East.
Maxar’s Weather Desk also predicted “broadly hotter than normal” conditions this summer. Its forecast calls for average temperatures over the season to be about 10% hotter than the 30-year normal.
“It is not surprising to forecast a top 10 hot summer,” said Maxar meteorologist Brad Harvey. “In fact, six of the top seven hottest summers have all occurred in the past 10 years.”
That noted, he added, “Many of the factors contributing to the hotter summers of late are still present this year, including the warm Atlantic Ocean…and the anomalously warm tropical waters in the west Pacific.”
Saal of StoneX Financial said strong exports and elevated heat could justify a plethora of recent forecasts that call for natural gas prices to approach $3.00 this summer. “We have plenty of drivers out there” to push up prices, he said. “But if any of them don’t pan out, the market could crush us.”
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