Daily natural gas deliveries to US facilities that produce LNG for export were a record 9.8 billion ft3/d in late March 2020, but deliveries fell to less than 4.0 billion ft3/d in June, according to data by IHS Markit. A mild winter and COVID-19 mitigation efforts have led to declining global natural gas demand and high natural gas storage inventories in Europe and Asia, reducing the need for LNG imports. Historically low natural gas and LNG spot prices in Europe and Asia have affected the economic viability of US LNG exports. Trade press reports indicate that more than 70 cargoes were cancelled for June and July deliveries, and more than 40 cargoes were cancelled for August deliveries. In comparison, 74 cargoes were exported from the US in January 2020.
Source: U.S. Energy Information Administration, based on IHS Markit
In 2019, on an annual basis, the US became the world’s third-largest LNG exporter; only Qatar and Australia exported more LNG. Several US LNG export facilities became operational in 2019. Most recently, in May 2020, the third train at Freeport LNG in Texas began commercial operations. Later this summer, the third train at Cameron and three of Elba Island’s small-scale moveable modular liquefaction system units are expected to come online, bringing US total liquefaction capacity to 8.9 billion ft3/d of baseload LNG export capacity and 10.1 billion ft3/d of peak export capacity.
In January 2020, 74 LNG export cargoes were loaded in the US, and LNG exports totalled 8.1 billion ft3/d – both record highs. LNG exports were only slightly lower from February through April, but they started to decline in May. The US Energy Information Administration (EIA) estimates that 62 cargoes were loaded in April and 52 cargoes were loaded in May. In its latest Short-Term Energy Outlook, EIA estimates that gross US LNG exports in April and May totalled 7.0 billion ft3/d and 5.8 billion ft3/d, respectively. EIA forecasts that gross US LNG exports will fall to a low of 3.2 billion ft3/d in July 2020 before increasing in each of the remaining months of the year.
Source: U.S. Energy Information Administration, Bloomberg Finance L.P., SP Global Platts
Global spot and forward LNG prices in Asia (such as the JKM price benchmark representing spot LNG prices in Japan, South Korea, Taiwan, and China) and natural gas prices in Europe (such as the TTF price benchmark in the Netherlands) have been at historical lows in recent months, which has affected the economic viability of US LNG exports. US LNG exports are priced at a premium to Henry Hub, in addition to tolling fees and transportation costs to destination markets. Higher spot and futures prices at Henry Hub compared with TTF prices in Europe since early May contributed to some cargo cancellations from the US this summer. Based on the number of cancelled cargoes, EIA expects US LNG export capacity will be utilised at less than 50% during June, July, and August 2020.
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