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Several major North American gas marketers post sales declines in Q4: survey

Several major North American natural gas marketers sold slightly lower volumes during the fourth quarter of 2019 compared to 2018 amid much lower prices and higher US production year over year.

The top five spots in S&P Global Platts’ gas marketer survey, based on the volumes of gas sold in North America in Q4, remained unchanged from Q3 2019, with BP continuing to top the rankings. With an estimated marketed volume of 20.1 Bcf/d, BP marketed 8 Bcf/d more than second place Macquarie Energy, with a volume of 12.1 Bcf/d. Still, those volumes were down from the same quarter last year by 2.2 Bcf/d and 500 MMcf/d, respectively.

ConocoPhillips’ marketed volumes fell by 900 MMcf/d to 7.5 Bcf/d in Q4 from 8.4 Bcf/d in Q4 2018. J. Aron’s marketed volumes fell by a similar measure, averaging 5.4 Bcf/d in Q4 compared with 6.4 Bcf/d in Q4 2018.

Henry Hub spot prices during Q4 2018 averaged $3.80/MMBtu and averaged $2.40/MMBtu during the same quarter in 2019.

Oil-focused Occidental Petroleum made its first appearance on the survey due its recent acquisition of Anadarko Petroleum. The combined company sold 1.6 Bcf/d.

Morgan Stanley Capital Group participated for the first time in the survey as well, where it ranked No. 7 with 5.5 Bcf/d sold during the quarter.

Stamford, Connecticut-based Castleton Commodities posted the largest increase year over year, marketing an average of 4 Bcf/d in Q4, compared with 3.2 Bcf/d in Q4 2018.

Demand for US gas ticked up only slightly from the top two demand sectors compared with the same quarter a year ago. Gas-fired power generation in the US averaged 28.7 Bcf/d in Q4, according to S&P Global Platts Analytics. It averaged 26 Bcf/d during Q4 2018. Residential and commercial demand averaged 32.6 Bcf/d during Q4 2018 and nudged up to 32.8 Bcf/d in Q4 2019.

Also, recent events such as the coronavirus outbreak and plunging oil prices present significant downside risk to the potential for higher power loads in 2020, according to Platts Analytics.

Even with 2% US GDP growth in 2019, US weather-adjusted loads declined 0.6%. With a 1.5% cut to US GDP expected in 2020, power load could decline by about 1% year on year on a weather-adjusted basis if other trends such as energy efficiency savings and behind-the-meter generation stay intact. Loads in Midwestern and Southern states in the US are more susceptible to industrial slowdown.

While such load declines would affect both power and gas prices, Platts Analytics still expects gas-fired generation to hold steady or even increase year on year in 2020 as coal-fired generation finds it hard to compete for dispatch at these low gas prices.

However, flattening or even declining gas production in 2020 could boost gas prices later this year, giving coal an edge in some markets.

The top 11 US gas producers plan to reduce their capital expenditure by an average of 26% in 2020, according to analysis of the latest round of earnings reports. While individual operators presented a mixed view on their production plans for the year, the overall average change in production is only an expected increase of 1.5% year over year. This is in sharp contrast to 2019 when producers expected 8% year-over-year growth. However, the view has shifted as operators now seek to generate free cash flow.

If prices hold at $30/b in the months ahead, Platts Analytics estimates associated gas production from the big five US oil plays – Permian Basin, Eagle Ford Shale, SCOOP/STACK, Bakken Shale and Denver-Julesburg Basin – could fall by an average of 0.4 Bcf/d to 0.8 Bcf/d through the end of the year by December 2020.
Source: Platts

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