The natural-gas glut is here to stay

Surging US exports of liquefied natural gas have driven the price down to below $3 per mBtu

Liquefied natural gas (LNG) is “in the doldrums”, says Caroline Bain for Capital Economics. Prices have fallen below $3 per million British thermal units (mBtu), even though it is still winter in the northern hemisphere.

A year ago LNG was trading at $6.8 per mBtu. The main culprit is “surging US exports” as well as new supply coming online from Australia and Russia. The coronavirus, which has knocked out much Chinese demand, delivered the final blow.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

“No major commodity in the US had a worse 2019 than natural gas,” says Nilanjan Choudhury on Yahoo Finance. Prices fell 25% last year, the worst annual decline since 2014. That has weighed on oil majors, which have made big gas investments in response to the “secular shift to the cleaner burning fuel for power generation”. 

The US uses 50% more natural gas than it did a decade ago, part of a global trend as governments phase out coal, notes Avi Salzman for Barron’s. Yet even that formidable demand growth has not been enough to keep up with surging supply. America’s fracking boom saw production increase by “about five billion cubic feet per day” “between December 2018 and December 2019”. Add in an unusually mild US winter and it is easy to see why local prices fell to a four-year low at the start of February. The gas glut means that most analysts think that prices are unlikely to recover “until next winter at the earliest”. 

Advertisement

Recommended

Visit/520073/dangerous-dear-and-dying-the-consensus-on-nuclear-is-wrong
Energy

Dangerous, dear and dying: why the consensus on nuclear power is wrong

Nuclear power is viewed as too dangerous and too costly to form part of our energy future. That’s plain wrong – and it could spell huge opportunity, s…
27 Dec 2019
Visit/519343/investors-today-are-unreasonably-bearish-on-oil-companies
Stockmarkets

Investors today are unreasonably bearish on oil companies

As the world looks to a future without fossil fuels, investors have abandoned oil companies. But we still need oil, says John Stepek. And this irratio…
9 Dec 2019
Visit/516690/is-it-time-for-you-to-get-a-new-energy-deal
Personal finance

Is it time for you to get a new energy deal?

You may well be paying too much for your gas and electricity. But finding a cheaper energy deal isn’t difficult and could save you a lot of money.
22 Oct 2019
Visit/516638/will-solar-energy-investment-funds-keep-shining
Energy

Will solar energy investment funds keep shining?

Investment funds designed to profit from the solar energy have done well, but now look expensive, says Max King.
22 Oct 2019

Most Popular

Visit/investments/property/601065/what-does-the-coronavirus-crisis-mean-for-uk-house-prices
Property

What does the coronavirus crisis mean for UK house prices?

With the whole country in lockdown, the UK property market is closed for business. John Stepek looks at what that means for UK house prices, housebuil…
27 Mar 2020
Visit/economy/uk-economy/601063/the-uks-bailout-of-the-self-employed-comes-with-a-hidden-catch
UK Economy

The UK’s bailout of the self employed comes with a hidden catch

The chancellor’s £6.5bn bailout of the self employed is welcome. But it has hidden benefits for the taxman, says Merryn Somerset Webb.
27 Mar 2020
Visit/investments/commodities/gold/601037/gold-is-on-a-wild-ride-so-should-you-be-buying
Gold

Gold is hard to find right now – so should you be buying?

With demand through the roof and the physical metal hard to find, it's not the best time to buy gold. But right now, says Dominic Frisby, you want to …
25 Mar 2020
Visit/investments/stocks-and-shares/share-tips/601035/share-tips-of-the-week
Share tips

Share tips of the week

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
27 Mar 2020