The U.S. natural gas market has lost more than 5 Bcf/d of demand from the industrial sector since the start of the year, Department of Energy data show, providing yet another metric by which to gauge the Covid-19 pandemic’s heavy economic toll.
U.S. natural gas demand from the industrial sector measured 20.1 Bcf/d in June, down nearly 1.0 Bcf/d compared to year-ago levels and down from 25.4 Bcf/d in January 2020, the U.S. Energy Information Administration (EIA) said in a research note published Monday.
Monthly measurements of industrial sector demand began showing year/year declines in March 2020, coinciding with the start of Covid-19 containment measures that disrupted economic activity. By May 2020, industrial sector natural gas demand declined 8% compared to 2019 levels, EIA said.
For context, May 2020 marked the largest year/year decline in U.S. industrial natural gas consumption since July 2009, during the Great Recession, the agency said. Consumption grew 5.4% on average in 2018 and 0.1% in 2019.
Industrial demand tends to correlate with seasonal changes in heating demand and is also influenced by conditions in the broader economy, the agency said, noting the sharp decline in U.S. GDP in 2Q2020.
EIA also highlighted data from the Federal Reserve showing declines in production activity among major natural gas-consuming industries in the United States.
“The largest decline in industrial production was from the primary metals industry, which was down by nearly 29% since January 2018 before beginning to recover in June,” EIA said. “The chemicals industry, which consumes about 40% of natural gas used for U.S. manufacturing and is the largest-consuming industry for natural gas, declined the least, declining about 5% at its peak. The paper and petroleum and coal product industries also declined notably this spring.”
In its most recent Short-Term Energy Outlook, EIA projected a 4.4% decline in U.S. industrial natural gas consumption in 2020, with consumption expected to then grow 1.1% in 2021.
The 2021 increase is expected to coincide with “growth in the overall economy and the natural gas-weighted industrial production index,” according to EIA. “The index reflects the growth of the underlying manufacturing subsectors and the relative importance of those subsectors to total natural gas consumption.”
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