Raymond James Energy Stat of the Week
by J. Marshall Adkins
Energy Stat: Waiting for a Rebound in U.S. Gas Prices? Industrial Demand Will Keep You Waiting
May 4, 2015
Even after the oil price meltdown, the spread between oil and North American natural gas prices remains wide enough to support domestic industrial gas demand growth in a variety of end markets. However, as energy investors know all too well, actual demand growth has been lagging far behind supply growth over the past five years, as many demand-side projects have been getting pushed out or canceled altogether. As it relates to U.S. industrial gas demand specifically, project push-outs have resulted in a lack of growth over the past few years, and growth in 2015 and 2016 is shaping up to be modest as well. However, as more projects materialize in 2017 and 2018, we project a total of 6 Bcf/d in incremental demand over the 2014-2019 timeframe. By itself, this is certainly not enough to rebalance the oversupplied domestic gas market. But when combined with LNG exports, increased gas-fired power generation, and gas exports to Mexico, growth in industrial demand will play a role in creating a more balanced supply/demand landscape over the next five years.
This is a summary of a much more detailed commentary. Please contact your financial advisor for the full report.
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