US LNG cargo cancellations doubtful for March: traders

Houston — Few if any US LNG cancellations were expected for March, according to multiple traders Jan. 20.

The date is important as it represents the deadline to nominate March cargo cancellations at Cheniere's two liquefaction facilities, which account for about 50% of US LNG export capacity.

Exports from the other US-based facilities were expected to remain robust through to March.

"At the moment I'd say [US cancellations] are unlikely given the value of TTF," said a Europe-based trader. "[Those cargoes] are still well in the money."

Using current S&P Global Platts assessed shipping rates and the value of delivered markers for Asia and Europe, exports to both regions are comfortably above the opportunity cost of gas at major US hubs.

Based on pervading Atlantic day-charter rates, the freight adjusted value of a March-loading cargo is currently highest for delivery into the Mediterranean market, though deliveries into Asia are still also profitable relative to the equivalent NYMEX Henry Hub futures contract.

The dynamics of relative profitability will, however, depend on the changing cost of shipping. The Platts-assessed Atlantic day-charter rate has been declining from record high levels at the beginning of January, when they reached $300,000/d. They have subsequently been declining gradually, and were last assessed on Jan. 20 at $200,000/d.

Market sources expected the cost of spot shipping to continue to decline as the spike in spot Asian demand brought on by an unusually cold winter in Asia begins to dissipate.

Coming out of the first quarter of 2021, however, market sources said that there was potential for some cancellations at US projects.

The most recent netback analysis done by S&P Global Platts Analytics using forward curves for the JKM, TTF, HH and independent shipping forecast, predicted US LNG exports to remain in the money by more than $2.00/MMBtu into the third quarter of 2021.