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Industrial gas demand to resume growth trajectory as hurricane season nears end

Highlights

SE industrial gas demand falls 4% on Zeta's approach

US demand hit 2019 levels prior to hurricane season

Slowdown in refining, chemicals sectors likely temporary

New York — Hurricane Zeta barreled towards the Louisiana coastline Oct. 28, posing yet another threat to Gulf Coast industrial gas demand. As the fast-moving system zooms across the southeast, though, demand from the broader US industrial sector appears primed to return to pre-pandemic levels by later this year.

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On Oct. 28, modeled industrial gas demand in the US Southeast fell roughly 250 MMcf/d, or about 4%, to an estimated 5.75 Bcf/d, data compiled by S&P Global Platts Analytics showed.

While a pre-storm pullback in industrial activity could already be underway along the US Gulf Coast, many facilities within the hurricane's forecast path plan to continue operating. By the morning of Oct. 28, not a single refinery in Louisiana had notified the state's Department of Environmental Quality of any plan to shut down ahead of the storm, a spokeswoman said by email.

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Hurricane Zeta had strengthened to a strong category 1 storm by early Oct. 28 and, according the National Hurricane Center, was forecast to maintain its sustained wind speed until landfall – potentially resulting in damage or flooding to industrial facilities along the Gulf Coast.

Nascent recovery

Following a series of global economic shutdowns earlier this year, US industrial gas demand suffered major setbacks as world demand for industrial products plummeted. According to Platts Analytics, gas demand from the domestic industrial sector had fallen by more than 5 Bcf/d, or about 20%, at its trough.

Concerns over a potentially deep and extended global economic recession prompted some market analysts to predict a lengthy road to recovery for the industrial sector. Earlier this year, Platts Analytics forecast a return to pre-pandemic gas demand levels for US industry no earlier than first-quarter 2021.

In August and again earlier this month, though, US industrial gas demand briefly hit year-ago levels, signaling a sooner-than-anticipated return to the sector's pre-pandemic growth trajectory.

Demand by sector

In September, a surprisingly rapid recovery in activity among steel, iron ore and ferroalloy manufactures saw sample gas demand from the primary metals sector eclipse its corresponding 2019 level.

In the chemicals and petroleum refining sectors, sample demand briefly climbed above year-ago levels this summer but has since retreated as a result of disruptions caused by recent storms.

Through late September, the Atlantic has already seen 28 named storms, including Hurricane Zeta – significantly exceeding the 13 to 19 named storms forecast by the US National Oceanic and Atmospheric Administration earlier this year.

Among those storms, 10– including two major hurricanes – have entered or formed within the Gulf of Mexico, causing significant wind damage and flooding to onshore oil and gas infrastructure.

During category 4 Hurricane Laura, several refineries, chemicals facilities and LNG export facilities sustained significant damage, including Citgo's 418,000 b/d facility in Lake Charles, Phillips 66's 260,000 b/d facility in Westlake and Sempra's Cameron, Louisiana LNG export facility, all of which were completely or partially shut down by the storm.

As the 2020 Atlantic Hurricane season winds down, a return to pre-storm season operations at refineries, chemical plants and other facilities could quickly boost industrial gas demand back toward 2019 levels by sometime later this year.