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.

“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”. 

Recommended

Where will house prices go in 2023?
House prices

Where will house prices go in 2023?

We explore what could happen to house prices in 2023 as the market continues to slow down.
24 Mar 2023
What is inflation and how will it affect you?
Inflation

What is inflation and how will it affect you?

There has been much talk of inflation recently. But what exactly is it and what does it mean for our money?
24 Mar 2023
3 success stories set for long-term growth
Investments

3 success stories set for long-term growth

A professional investor tells us where he’d put his money. This week: Felix Wintle, manager of the VT Tyndall North American Fund, selects three favou…
24 Mar 2023
Share tips of the week – 24 March
Investments

Share tips of the week – 24 March

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages
24 Mar 2023

Most Popular

Where will house prices go in 2023?
House prices

Where will house prices go in 2023?

We explore what could happen to house prices in 2023 as the market continues to slow down.
24 Mar 2023
Will energy prices go down in 2023?
Personal finance

Will energy prices go down in 2023?

Ofgem’s price cap is now predicted to fall below £2,000, based on average typical use, from July, for the first time since 2022. We have all the detai…
21 Mar 2023
5 top UK tech stocks
Investments

5 top UK tech stocks

The UK market has never been considered a fertile hunting ground for tech stars. But there are plenty of promising companies beyond the old economy, s…
23 Mar 2023