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Natural gas price up slightly but faces long-term threat

By Lawrence Gash

Increases in global supply and storage outstrip current demand

prices were slightly higher in trading on November 20. Natural Gas December 2019 futures, for example, was up 1.38 per cent, standing at 2.5450.

Investors and traders may welcome this small gain. However, natural gas prices were still down on the start of the week and the picture for the near future is gloomy.

An unusually warm start to winter in the US and an increase in supplies has put pressure on gas prices.

Indeed, a global increase in gas supplies looks set to affect prices for the next few years at least. According to the United States Energy Information Administration, the US is importing more natural gas from Canada and is also increasing its average total supply.

The second largest economy in the world is also preparing to increase its natural gas supplies. China’s National Petroleum Corporation (CNPC) has begun construction of what will be one of the largest underground natural gas storage centres in China. Located in Panjin city in Liaoning province the facility will cost around 60bn yuan ($8.5bn, £6.58bn) and can store 11.5 billion cubic meters of natural gas.

This is not a stand-alone investment. The CNPC announced in January 2019 its plans to construct 22 more gas storage facilities by 2030 and to expand 10 existing ones.

On top of an increase in global supply and storage capacity, natural gas prices could be further hemorrhaged by an increase in output, with a number of major producers announcing production increases.

Australian energy firm Origin Energy, for example, has just raised its fiscal 2020 output guidance for its Australia Pacific LNG project, the biggest producer of liquefied natural gas in eastern Australia, from between 680 and 700 petajoules to between 690 and 710.

FURTHER READING: NY governor threatens to revoke National Grid’s gas franchise certificate

FURTHER READING: China and France sign deals worth $15 billion

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