U.S. liquefied natural gas (LNG) exports rose to a record in November as one of many energy sector products that have been affected by the COVID-19 pandemic, according to recent reports by the U.S. Energy Information Administration (EIA).
In summer 2020, LNG exports fell to the lowest level in 26 months but rose to a record level in November, exceeding the previous record set in January 2020. The November exports were 9.4 billion cubic feet per day, which was 93% of peak LNG export capacity use.
International natural gas and LNG prices rose in Asia and Europe because global natural gas demand increased after COVID-related restrictions were eased and global LNG supply levels declined as a result of unplanned outages at LNG export facilities in Australia, Malaysia, Qatar, Norway, Nigeria, and Trinidad and Tobago. Also, 2.7 billion cubic feet per day of new U.S. LNG export capacity was added in 2020 and several U.S. LNG export terminals that were impacted by hurricanes and annual maintenance have resumed LNG shipments.
In the second half of 2020, the rise in LNG exports and reduced natural gas production contributed to an increase in natural gas spot prices at the national benchmark Henry Hub in Louisiana. For 2020, the average Henry Hub price was $2.05 per million British thermal units, the lowest annual average price in decades. The price was $1.66 per million British thermal units in June, the lowest monthly price in decades. Prices were low because the pandemic-related economic effects reduced natural gas production and consumption.
Natural gas consumed to generate electric power in the United States rose 2% to a record high of 31.6 billion cubic feet per day in 2020, from 2019. The increase happened despite lower U.S. electricity consumption in 2020. Natural gas consumed by electric power plants rose to a daily record of 47.2 billion cubic feet at the end of July, according to S&P Global Platts, because of high summer temperatures and lower summer prices.
Production of dry natural gas declined by 2.2 billion cubic feet per day to 90.9 billion cubic feet per day in 2020, from 2019, according to the EIA. The decline reversed a three-year growth trend in U.S. production. The number of rigs drilling for natural gas started to fall in the spring, declining to a record low of 68 natural gas-directed rigs in July. The rig count remained flat through the remainder of 2020.
In the first half of 2020, responses to the pandemic led to declines in global petroleum demand and volatile crude oil markets. Over the second half of the year, crude oil prices remained stable as demand started to recover. Amid declining crude oil demand and rising inventories at the start of the pandemic, West Texas Intermediate (WTI) crude oil traded at negative prices on April 20, the first time the price for WTI futures contract fell to less than zero since trading began in 1983. The next day, international benchmark Brent crude oil prices fell to $9.12 per barrel, the lowest daily price in decades.
The decline in demand for petroleum products led refiners to cut operations. Between March 13 and May 8, U.S. weekly gross refinery inputs declined by 20% to 13.1 million barrels per day, the lowest level of crude oil processed in the United States since the week ending Sept. 26, 2008, after Hurricanes Gustav and Ike disrupted refineries along the U.S. Gulf Coast.
Crude oil production didn’t slow as quickly as refinery operations, and this led to a rise in crude oil inventories. Between March 13 and May 1, commercial crude oil inventories in the storage hub of Cushing, Okla., rose by 27 million barrels, reaching 83% of its capacity and contributing to the negative price on April 20.
After the April low, petroleum product demand and refinery runs started to rise. However, refinery operations remained lower than the previous five-year (2015-19) average as hurricanes and storms shuttered refineries over the summer. Refinery runs started to rise again in November.
Crude oil prices started to increase following a rise in demand after April. The WTI price rose to $40 per barrel on July 1 and remained near that amount through most of the remainder of the year. At the end of 2020, crude oil prices started to rise after news of the distribution of COVID-19 vaccines and the announcement from members of the Organization of the Petroleum Exporting Countries (OPEC) and partner countries (OPEC+) that they would limit production increases in 2021.
Gasoline also was affected by the pandemic as reductions in passenger travel and fuel demand led to lower gas prices across the United States. U.S. regular retail gasoline prices fell 17%, or by 44 cents, to an average of $2.17 per gallon in 2020, from 2019. Gasoline prices were more than $2.50 per gallon at the start of 2020, and fell to $1.77 per gallon on April 27, the lowest average price since early 2016.
Vehicle travel and gasoline demand started to rise in May, but gasoline inventories remained high throughout the summer because of lower demand, even as refiners reduced gasoline production because of lower margins.