As oil prices rose to new heights in 2018, so did natural gas consumption in the United States as the Energy Information Administration (EIA) reported an increase of 10 percent compared to the previous year.
Consumption reached a record high of 82.1 Bcfd and came from across all sectors in 2018. The majority of the consumption came from the electric power sector due to a combination of recent natural gas-fired electric capacity additions and weather.
The Direxion Daily Natural Gas Related Bull 3X ETF (NYSEArca: GASL) rose over 4 percent on Tuesday, and is up almost 40 percent year-to-date.
“As natural gas comprises a larger share of electricity generation, natural gas consumption increases both in the summer — when air conditioning demand is high — and in the winter, especially in places such as the South, where electric space heating is more common,” wrote Kallanish Energy in a blog post.
Per WorldOil.com, “In 2018, the U.S. experienced several periods of extremely warm and cold weather, contributing to record-high natural gas consumption. Much of the Lower 48 states experienced prolonged periods of colder-than-normal temperatures in January 2018, and record-high average monthly temperatures during summer 2018 increased natural gas use in the electric power sector.”
Last year, the natural gas markets didn’t experience any major disruptions despite potential headwinds from Chinese tariffs. However, as the U.S. and China, both heavy consumers of natural gas, work out a permanent trade deal, it’s preventing boatloads of capital investment from entering the markets.
Even if a permanent trade deal doesn’t materialize from ongoing negotiations, some analysts feel its only natural that the U.S. and China resume their natural gas trading.
“They’re just the elephant in the room and until there’s clarity on where China is going to source their natural gas … then it’s hard for other buyers to make decisions about which projects to attach themselves to,” said Katie Bays, head of energy and utilities, Height Capital Markets.
The United States Natural Gas Fund (NYSEArca: UNG) was down just under 1 percent as of 3:00 p.m. ET.
For more market trends, visit ETF Trends.