Both U.S. natural gas trading activity and marketed production reached record highs in 2018, according to a report released by Cornerstone Research, a global economic and financial analytical firm. Total natural trading activity increased for the fourth consecutive year and marketed production continued the steady growth observed since 2005. The increase in marketed production was driven by the continued development of lower-cost shale gas and tight oil resources.
The report, Characteristics of U.S. Natural Gas Transactions: Insights from FERC Form 552 Submissions, found that trading activity in 2018 rose approximately 11% over the previous year, to 146,227 tBtu. However, aggregate exchange trading of natural gas contracts on the two main futures exchanges, CME Group Inc. and Intercontinental Exchange Inc., decreased slightly.
Liquefied natural gas (LNG) accounted for 31% of total U.S. natural gas exports in 2018, compared to 22% in 2017. Exports to Asia continued to increase, largely driven by South Korea. The next largest importer was Latin America, primarily driven by Mexico.
“The United States is a growing net exporter of natural gas, with two-thirds of the growth stemming from LNG exports,” said Nicole Moran, a principal at Cornerstone Research and co-author of the report. “As production continues to outpace consumption, exports, driven by LNG, are expected to quintuple by 2023.”
Other findings of the report included:
– Annual marketed production was 36,958 tBtu in 2018, a 12% increase over 2017.
– The 2018 trading activity reported in the Form 552 submissions rose 11% to 146,227 tBtu, transacted by 678 respondents.
– The 20 companies with the largest transaction volumes (by purchases and sales) accounted for approximately 43% of total reported volume.
– Index-priced transactions comprised around 80% of all Form 552 transactions in 2018 compared to 65% in 2008.
– Between 2017 and 2018, index-priced next-day transactions increased from approximately 35% to 37% while index-priced next-month transactions decreased from 45% to 43%.
– For the fourth consecutive year, companies that chose not to report fixed-price volume to the indices comprised a larger share of fixed-price volume than did companies that chose to report.
– In 2018, approximately 14% of Form 552 respondents reported transaction information to the price index publishers for themselves or at least one affiliate.
– The volume of reported transactions indicates that, on average, a molecule of natural gas was traded through approximately 2.4 transactions from production to consumption.
Click here to download the report.