The U.S. oil and natural gas industry have faced one of the roughest patches in recent history with the current global pandemic of COVID-19.
The oil market faced a sinking demand with global overproduction, and prices also touched a negative $40. On the other hand, the natural gas market hasn’t been impacted much. Prices generally remained very low but stable below $2.00 since mid-January that’s before the COVID-19 scenario.
U.S. oil demand has seen a plunge attributed to coronavirus. The stay-at-home orders have affected gasoline prices, which accounts for nearly half of the oil usage with the slashing of consumption to multi-decade lows. The gasoline demand, however, was 7.4 million b/d, which is low but rising fast.
Recently, the oil prices rose vis-à-vis the U.S. Energy Information Administration reporting of crude inventory decline of 700,000 barrels. The reality is that prospects for oil-based cars might actually improve from this crisis. Fearing human proximity and a higher chance of virus infection, and many commuters around the world may prefer utilising less public transport.
Unfortunately, all energy industries are struggling through the pandemic, which includes disrupted supply chains and workforce shortages for renewables. However, experts expect that in a year or two, the jet fuel demand would recover with travel bans ending and business trips returning to normal.
For natural gas, the market is poised to become one of the most vital sources of energy. The most reassuring sign of its competence is that through the first four months of 2020 have actually been higher than for the same period in 2019. The low prices will encourage another gas use boom in electricity this coming summer, and at 40%, gas is easily our primary source of power. With gas at $2.75, it is difficult for other sources to compete. Additionally, gas is a rising 45% of U.S. power capacity, its price could double and it would still dominate the market.
Amid COVID-19, the gas exports are a bit down and it is expected to struggle through the summer, as low prices and demand globally make it harder to compete. However, that’s not a long-term trend. Projections from the U.S. Department of Energy indicate that gas will remain a dominant source of power generation and heating.
Experts believe that COVID-19 is a temporary calamity. As far as energy goes, the demand will normalize. Oil and natural gas remain irreplaceable at scale (with coal and nuclear statistically proven to be on the decline).
In conclusion, energy markets are cyclical and have faced severe down cycles before, only to ultimately come out stronger on the other end.