Last updateFri, 03 Jul 2020 5pm

U.S. Natural Gas Production Efficiency Continues to Improve

U.S. Energy Information Administration (EIA) analysis of underlying data on natural gas well efficiency shows how U.S. natural gas production increased in 2019 because, in part, of greater productivity of new wells drilled in shale and tight formations. Initial production rates for natural gas production from new wells in the DPR’s seven regions have generally increased since at least 2007.

More effective drilling techniques, including the increasing prevalence of hydraulic fracturing and horizontal drilling, have increased initial production rates. In particular, the injection of more proppant—sand or similar particulate material suspended in water or other fluid—during the hydraulic fracturing process and the ability to drill longer horizontal well components (also known as laterals) have improved well productivity.

API: U.S. Energy Market Demand Slowly Rebounding

The gradual reopening of state economies drove a notable rebound in U.S. energy markets in the month of May with U.S. petroleum demand increasing 14% to 16.2 million barrels per day (b/d), according to data released in the American Petroleum Institute’s May 2020 Monthly Statistical Report and Q2 2020 Industry Outlook. Motor gasoline accounted for more than 80% of the demand increase with monthly deliveries surging nearly 29% to 7.3 million b/d after reaching a multi-decade low in April. Demand for distillate fuel and liquid feedstocks also notched monthly increases, while jet fuel posted its fifth consecutive monthly decline and reached its lowest level since 1967.

On the supply side, reduced drilling activity led to a 0.6 million b/d decrease in U.S. crude oil production which averaged 11.4 million b/d in May. By contrast, U.S. natural gas liquids production held relatively steady at 4.8 million b/d, down 0.8% from the month prior. These production decreases correspond with a record fall in U.S. drilling activity, which has declined 70% year to date in response to the unprecedented and abrupt decline in demand.

Supreme Court Delivers Win for Atlantic Coast Pipeline

In a 7-2 ruling, the U.S. Supreme Court ruled that construction of the $8 billion Atlantic Coast pipeline can proceed to cross the Appalachian Trail in the George Washington National Forest. This decision overturned a ruling by the U.S. Court of Appeals for the 4th Circuit.

Dominion Energy believes that the pipeline can improve gas supply for Mid-Atlantic markets, thereby promoting price stability. For example, the project will provide a new supply of natural gas for Duke Energy’s electric generation and will serve the growing customer needs for Piedmont Natural Gas and Virginia Natural Gas.

Global Natural Gas Market Shook by Pandemic, Mild Winter

The combination of the COVID-19 crisis and an exceptionally mild winter in the northern hemisphere have put global demand for natural gas on course for its largest annual decline in history, the International Energy Agency (IEA) says in a new report. Global gas demand is expected to fall by 4%, or 150 billion cubic meters – twice the size of the drop following the 2008 global financial crisis.

As of early June, all major gas markets worldwide are experiencing falls in demand or slumps in growth, according to the IEA’s latest annual market report Gas 2020. For the full year, more mature markets across Europe, North America and Asia are forecast to see the biggest drops, accounting for 75% of the total decline in gas demand in 2020.

Chemical Activity Barometer Fell in May

The Chemical Activity Barometer (CAB), from the American Chemistry Council (ACC), fell 5.4% in May on a three-month moving average basis following a 5.4% decline in April. On a year-over-year basis, the barometer fell 12.4% in May.

The unadjusted May data shows a 0.3% decline following a 6.3% drop in April and an 8.9% decline in March. The diffusion index fell from 35% to 29% in May as production declines became more widespread. The diffusion index marks the number of positive contributors relative to the total number of indicators monitored. The April CAB reading was revised upward by 0.37 points and the March reading was revised downward by 0.08 points.

“The May CAB reading is consistent with a recession, but given the small unadjusted decline of only 0.3%, one that may bottom out,” said Kevin Swift, chief economist at ACC.

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