Factbox: US gas markets see minimal upside from rising global LNG prices

New York — LNG import prices in Northeast Asia climbed into the mid-$2/MMBtu range over the past week, the index's highest since late March, as suppliers across the globe continue to announce production cuts. Recent loading data shows some cargo exports from Malaysia, Nigeria and Qatar could be curtailed this month, a market source in Singapore told S&P Global Platts Wednesday.

In the US market, LNG feedgas volumes tumbled into the low 6 Bcf/d range this week - their lowest since the October 2019 maintenance season - amid growing signs that US offtakers could be deferring or foregoing additional, unreported export volumes in May.

"The recent drop in US LNG feedgas deliveries suggests that a weakening of prices globally, led by the collapse of the Platts JKM, may now be constraining exports," said Ross Wyeno, lead analyst, Americas LNG, S&P Global Platts Analytics.

The emerging risk to US LNG cargoes, and the potential for a growing export supply overhang, could be behind a recent retreat in US Henry Hub forwards prices. On Tuesday, the balance 2020 curve settled at $2.12/MMBtu, down from an annual high at $2.43/MMBtu just last week.

PRICES

• **The Platts JKM climbed to a premium over comparable US and European gas benchmarks this week, settling Wednesday at $2.45/MMBtu - its highest since late March.

  **The Dutch TTF and US Henry Hub prompt-month contracts tumbled from recent highs near $2/MMBtu, both settling Wednesday in the low $1.60s/MMBtu.

  **The spread between Henry Hub summer and peak-winter gas prices widened to an annual high at over $1/MMBtu this week, amid likely concern over a near-term supply overhang.

  **Lower summer gas prices dragged the Henry Hub balance 2020 forward curve down nearly 13% over the past week, with the benchmark index settling Tuesday at $2.12/MMBtu.

  **Supply concerns extended into regional markets over the past week, lowering forwards gas prices at regional benchmarks in the Permian and Appalachian basins - the largest suppliers of associated and dry gas production, respectively.

  **Waha January 2021 forwards retreated nearly 10% over the past week, settling at $2.60/MMBtu; Dominion South January forwards saw an 8% retracement, falling to $2.52/MMBtu.

TRADE FLOWS

LNG

**With JKM rising 21% week on week and Platts Mediterranean and Northwest Europe markers languishing at record lows, market sources expect Atlantic cargoes to move eastward, though these supplies could weigh on Northeast Asian spot prices.

**Natural gas deliveries to the six major US LNG export terminals fell Tuesday to a revised 6.2 Bcf/d, the lowest level since October 17, 2019; Flows rose slightly to 6.4 Bcf/d Wednesday.

**Amid weak global demand, the current US LNG export environment is expected to persist heading into summer as cargo cancellations increase, pressuring terminal utilization, Platts Analytics data show.

**Historically, May is a lower demand period when LNG facilities tend to carry out seasonal maintenance.

Onshore gas

**US gas production appeared to stabilize over the past week at around 89.4 Bcf/d amid a resurgence in growth from key dry basins including Appalachia and the Haynesville.

**Appalachian gas production has averaged 32.6 Bcf/d over the past week, recently hitting a daily high at over 32.8 Bcf/d - a level not seen since late 2019.

**Haynesville gas production is at its highest on record this month, averaging over 13.1 Bcf/d.

**Permian gas production continued to decline over the past week, dipping below 11 Bcf/d.

**US industrial gas demand showed signs of a potential recovery over the past week, rising to an average 20.6 Bcf/d, up from early May lows at under 20 Bcf/d.

**Natural gas consumed at ethanol plants and refineries represents the most immediate upside from lifting lockdowns because of the close relationship to crude demand.

**US gas in storage was estimated Thursday at 2.319 Tcf for the week ending May 1; inventories are now 395 Bcf above the five-year average and nearly 800 Bcf above year-ago levels.

INFRASTRUCTURE

• **The US oil and gas rig count tumbled to just 398 last week, marking its lowest on record dating back to 2005, recent data from Enverus Drilling Info showed.

  **The Permian Basin rig count fell 219, its lowest since September 2016.

  **A privately held energy infrastructure firm agreed to buy Magnolia LNG from parent LNG Limited, rescuing the Louisiana project; the transaction includes the proposed facility's optimized single mixed refrigerant liquefaction technology.

  **NextDecade says virus-fueled market disruptions could further delay a final investment decision for its Rio Grande LNG export terminal in Texas and harm its ability to sustain operations.

  **Pembina may substantially cut capital spending again next year if the drop in energy prices drags on; the timing of its proposed Jordan Cove LNG export project in Oregon remains uncertain.

  **Energy Transfer will cut 2020 spending on growth projects by at least $400 million; for now, it still plans to proceed with development of its proposed Lake Charles LNG export project in Louisiana.