The bad news seems to keep flowing for natural gas, not just in terms of near-term threats, but those farther out as well.
The traditionally local U.S. natural gas market could be hit by a flood of imports this winter as new sources of overseas production ramp up.
This could be an example of how technological innovation (LNG transport) can hurt investors in gas plays such as the ETF United States Natural Gas (UNG).
Even while helping consumers via cheaper gas of course.
WSJ: The flood of LNG imports to the U.S. that some industry watchers had predicted over the summer never materialised, held back by low U.S. gas prices relative to Europe and delays in starting up overseas export facilities. But projects in Qatar, Yemen, Russia and Indonesia are starting to come online, just as colder weather in the U.S. is sparking greater heating demand for gas and the difference between U.S. and overseas prices narrows. While the onset of winter means record-high U.S. inventories of the fuel will soon start to be drawn down, the prospect of ready additional supplies over the horizon could limit price gains, even as demand rises.
Although LNG represents only a small portion of U.S. gas supply – about 2.5% in the third quarter of 2009, according to the Department of Energy – a significant uptick in imports to the U.S. could weigh on prices.
The U.S. has long served as a “market of last resort” for LNG because the country has a much higher storage capacity than European or Asian countries. As storage facilities in those regions near capacity, LNG shippers are forced to send cargoes to the U.S., despite lower gas prices here. An increase in gas production overseas means countries like Qatar could be compelled to send more gas to North American shores. LNG exporting facilities that have recently started up new liquefaction plants or are scheduled to do so this month include RasGas Co.’s Ras Laffan III in Qatar, Yemen LNG, BP PLC’s (BP) Tangguh in Indonesia, and Qatargas II, according to Waterborne.
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