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Energy Market Update: January 8, 2019

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Happy new year! As the year gets going, we would be wise to remember all that we learned in 2018. With that in mind, today we are going to recap one of the most interesting trends in natural gas from last year and look at how it will affect the markets in 2019.

Join Direct Energy Business Strategist Tim Bigler for a market-by-market look:

Natural Gas Demand

Demand for natural gas in the U.S. is growing with no real end in sight. Exports to Mexico have increased (albeit gradually) since January 2016, when we exported around 3 Bcf (billion cubic feet) per day, to today’s levels of close to 5 Bcf/d. And while demand in Mexico could fluctuate and thereby affect U.S. export levels, the more influential factor moving forward will be LNG (Liquefied Natural Gas).

As of late 2018, LNG is now a major export for the U.S. The last three years have been a time of explosive growth for LNG; exports counted close to zero in January 2016 but are now comparable to the 5 Bcf/d rate that we export to Mexico. This is probably thanks to a handful of new LNG export facilities (e.g., Cheniere’s Sabine Pass in Louisiana and Dominion’s Cove Point in Maryland) coming online in recent years, with many more on the way.

The sheer number of new facilities, and the export capacity that they add, will be a story to watch in 2019. By the end of this year, the Energy Information Administration projects that LNG exports will reach 8.9 Bcf/d (an increase of about 67% over our current rate). This is important because:

  • LNG exports are not weather-dependent, and will increase demand regardless of weather patterns
  • LNG demand is increasing worldwide

What does all of this mean for us? It’s probable that export rates, production, and demand will increase this year, which could in turn keep prices elevated. So, barring unforeseen mechanical issues, it seems unlikely that the U.S. will keep much of a year-over-year surplus of natural gas supply moving forward.

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Posted: January 08, 2019