Industrial sector gas demand hits 8-month high as hurricane season winds down

US industrial gas demand this month has edged up to its highest since late March as the sector recovers from a battering taken during this hurricane season and from a still ongoing coronavirus pandemic.

On Nov. 13, industrial demand was estimated at 23.3 Bcf/d, marking a nearly eight-month high.

Despite the single-day milestone, industrial activity still has significant ground to recover after this year's dual setbacks. Month-to-date, gas demand from US industry has averaged 22.5 Bcf/d – about 2 Bcf/d, or 8%, below its year-ago level, data compiled by S&P Global Platts Analytics shows.

Rising industrial demand has been fueled in part by a surge in industrial activity across the US Southeast where chemicals facilities and refineries are ramping up activity as this year's record hurricane season winds down.

In November, industrial gas demand in the Southeast has averaged over 6.2 Bcf/d – up nearly 4% compared to October and more than 8% higher compared to September.

Over the past two weeks, sample data from Platts Analytics has shown a surge in demand from the chemicals and refining sectors – both of which have heavy concentrations in the Southeast. At both facilities types, gas demand is now at its highest since early August, prior to this year's major storms.

Nascent recovery

Through mid-November, at least 11 named storms – including three major hurricanes – have entered or formed within the Gulf of Mexico, occasionally bringing flooding, heavy rain and damaging winds to chemicals facilities, refineries and other onshore oil and gas infrastructure.

Recent data suggests that those industries have yet to fully recovery from major storms like category 4 Hurricane Laura. In November, capacity utilization at US refineries has remained below 75%, according to data from the US Energy Information Administration. While the autumn season often marks a low point for US refining activity, current utilization trails year-ago levels by more than 12 percentage points.

For the refining sector, and most US industries, reduced economic activity caused by the coronavirus pandemic has also been a persistent drag this year. Since April, gas demand from the industrial sector has trailed its year-ago level by over 800 MMcf/d or about 4%, Platts Analytics data shows.

Data from the primary metals sector, though – which is particularly sensitive to global economic trends – suggest that the pandemic's worst economic impacts may have passed, barring any major shutdowns this winter.

Earlier this year, when major and simultaneous shutdowns were enacted across Asia, Europe and the Americas, sampled industrial-sector gas demand from the primary metals sectors dropped about 40% compared to its year ago level. In November, demand from primary metals is now roughly at par with its November 2019 level, Platts Analytics data shows.