The natural-gas glut is here to stay

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.

Article continues below

Try 6 free issues of MoneyWeek today

Get unparalleled financial insight, analysis and expert opinion you can profit from.

Start your trial

https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

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”.

Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019.

Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere.

He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and emerging markets, where his experience living in Beijing, and conversational Chinese, prove useful.

Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.