Factbox: Global gas prices rebound from record lows as nascent recovery begins

Global gas prices continue holding steady above record lows registered over the past three months as pandemic-related demand destruction bottoms and a slow, likely bumpy road to recovery begins.

The Platts JKM climbed to its highest in nearly four months on July 22, settling at $2.49/MMBtu amid growing concern over potential supply disruptions from Australia. A steep winter-season price contango in Asia promises an uptick in global LNG trade by autumn, but could drive an unsustainable increase in US cargo exports.

In Europe and the US, benchmark month-ahead gas prices at the TTF and Henry Hub, respectively, continue to search for direction, both settling in the upper $1.60s/MMBtu on July 22. While recent demand growth from US power generators and industrial end-users appears promising for a market recovery, supply gains from associated gas basins threaten to overwhelm the finely balanced market.

"The promising recovery for gas demand in Europe and North America is not so obvious in Asia," said S&P Global Platts Analytics head of gas and power Ira Joseph. "A steep price contango through December is nevertheless pushing supply in Asia's direction under the assumption that higher use will arrive by Q4."

PRICES

**The Platts JKM settled at $2.49/MMBtu on July 22, a nearly four-month high for the Northeast Asian spot LNG import price that comes amid concern over potential supply disruptions.

**JKM derivatives remain in steep contango with October and November swaps settling July 22 at $3/MMBtu and $3.65/MMBtu, respectively.

**Europe's benchmark Dutch TTF settled at $1.67/MMBtu on July 22. The prompt-month contract is now trading at a 45% premium to its late-May record-low at $1.14/MMBtu.

**US Henry Hub prompt-month futures settled up modestly to $1.68/MMBtu on July 22. The benchmark index fell to a 25-year low on June 25, at just $1.48/MMBtu.

**The Henry Hub balance-2020 forward curve settled at an average $1.98/MMBtu on July 21. A steep winter contango has endured with December currently valued at $2.70/MMBtu.

TRADE FLOWS

LNG

**Feedgas flows to Freeport LNG in Texas were at zero for the 16th consecutive day July 22, amid continued US cargo cancellations. Total feedgas delivery to US LNG terminals was estimated at 3.6 Bcf/d July 22, up from an annual low at 2.9 Bcf/d earlier in July.

**At least 26 cargoes scheduled for loading at US LNG export terminals in September have been canceled, a drop from an estimated 40 cancellations for August and 45 for July.

**Low international prices and coronavirus demand destruction are to blame for the US cargo cancellations that started in April and now total at least 157, data compiled by S&P Global Platts shows.

**Production issues at Chevron's Gorgon LNG and weather-related issues at Woodside's offshore Northwest Shelf field in Australia have offered some additional support to LNG prices in Northeast Asia amid concern over supply disruptions.

**End-users from South Korea and Japan reportedly delayed September LNG procurements due to weak demand. Two major Japanese end-users were heard offering September cargoes.

**Global gas forwards suggest LNG trade could accelerate by late fall, especially for US deliveries to Europe, as the market contango allows some loadings to resume.

Gas

**US gas production is averaging 87.6 Bcf/d over the past week, up from a 21-month low at 85.4 Bcf/d.

**Permian associated gas production has averaged 11.3 Bcf/d over the past week. It fell to 9.1 Bcf/d in late May amid low oil prices and widespread well curtailments.

**The US' largest gas producer, EQT, will report second-quarter earnings on July 27, offering potential clues for Appalachia's balance-of-year supply outlook.

**Platts Analytics forecasts US production to hit a balance-of-year high at over 89 Bcf/d, with gains accruing mostly from Appalachia and the Permian.

**US gas in storage was estimated July 16 at 3.178 Tcf for the prior week, 436 Bcf above the five-year average. Over the next three weeks, the surplus is forecast to shrink modestly.

INFRASTRUCTURE

**US producers added nine drilling rigs during the week ending July 15, lifting the total to 288, just above a record low in the prior week, data from Enverus DrillingInfo showed.

**India's Petronet has resumed talks with Tellurian about potentially investing up to $2.5 billion in the Driftwood LNG project in Louisiana. The two companies had reached a preliminary agreement in September 2019 but failed to firm up terms by an end-May deadline.

**Tellurian is evaluating potential scope changes to the first phase of its Driftwood project that could significantly reduce costs.

**NextDecade won't develop a sixth liquefaction train at its proposed Rio Grande LNG export facility in Texas. Technology will allow it to achieve the same total capacity with just five units.

**Kinder Morgan is finalizing an investigation into the cause of a compressor fire that has kept one of the liquefaction units at its Elba export facility in Georgia offline for more than two months.