Rebound in industrial gas demand stumbles following busy Atlantic storm season

Denver — A recent flurry of hurricanes and tropical storms in the Gulf of Mexico are likely to be blamed for a floundering recovery in US industrial gas demand as refineries and chemicals facilities along the Gulf Coast are yet to recover from prolonged slowdown in activity.

The 2020 Atlantic hurricane season has, by any measure, been an active one.

Through late September, the Atlantic has already seen 23 named storms, significantly exceeding the 13 to 19 named storms forecast by the US National Oceanic and Atmospheric Administration.

Among those storms, seven – including one major hurricane – have entered or formed within the Gulf of Mexico, threatening both US offshore and onshore oil and gas infrastructure.

Offshore platforms have likely faced the largest and most frequent disruptions from the recent storms. Still, chemicals facilities, refineries and export facilities along the US Gulf Coast have also faced setbacks caused by flooding, heavy rain and damaging winds. Recent data suggests that the slowdown in activity caused by tropical cyclones has continued through late September as many facilities continue repairing and ramping up damaged infrastructure.

Weaker gas demand from many of those facilities appears to be dragging down an emerging recovery in the industrial sector, where total demand dropped more than 5 Bcf/d or about 20% from January to July as the US and global economies reeled from pandemic-fueled shutdowns.

In September, US industrial gas demand has averaged about 20.6 Bcf/d, or nearly 100 MMcf/d weaker compared to its prior-month average. In both July and August, demand from the industrial sector made steady gains, climbing about 400 MMcf/d in both month as it rebounded from an annual low in June at just 19.9 Bcf/d, data from S&P Global Platts Analytics shows.

Refineries, chemicals facilities

From late August through September, analytics data shows a 7% drop in gas demand from sampled chemicals facilities and a 5% decline in sampled demand from refineries, compared to their respective July averages.

Regional data from the same comparison period also shows concentrated declines in industrial gas demand across the Southeast and Texas, where much of the US oil and gas infrastructure is located.

Refinery data from the US Energy Information Administration supports the picture of a slowdown in activity caused directly by storm damage. In the week following landfall of Hurricane Laura – a massive category 4 storm that ravaged Southeast Texas and Southwest Louisiana – US refinery utilization dropped for the first time in 15 consecutive weeks. At an estimated 74.8% utilization as of Sept. 18, refinery-capacity use still remains about 7 percentage points below its pre-storm level.

According to a recent forecast from Platts Analytics, industrial gas demand should revert to it pre-storm recovery trend by October and potential approach pre-pandemic levels by first-quarter 2021.