Utilization at US liquefaction terminals plunges amid wave of cargo cancellations

Feedgas deliveries to the six major US LNG export terminals plunged June 1 to their lowest level in 9.5 months amid a wave of cargo cancellations due to weak market conditions, according to S&P Global Platts Analytics data.

The biggest drops in flows were seen at Cheniere Energy's two terminals – Sabine Pass in Louisiana and Corpus Christi Liquefaction in Texas – and at Freeport LNG south of Houston. Both operators declined to comment.

About 45 LNG cargoes scheduled to be loaded in July at US export terminals were said to have been canceled by customers, approximately double the number of cancellations for June, according to market sources. More than two dozen of the total canceled US cargo loadings for July are tied to Cheniere's facilities. Japanese buyers Osaka Gas and JERA are said to have canceled a total of three July cargoes from Freeport LNG.

Total gas deliveries to the major US liquefaction terminals totaled 4.3 Bcf/d on June 1, the lowest level since Aug. 17, 2019, Platts Analytics data show. With the forward June netbacks trading in negative territory for a couple months, the near 40% utilization of US LNG export facilities is likely price driven. This is further supported by the known cargo cancellations.

Global LNG demand continues to languish below available supply, leaving LNG price markers from Asia to Europe trending just above record lows. At the close of May, the Platts JKM was assessed at $1.938/MMBtu, while the Platts Northwest European Marker was assessed at $1.467/MMBtu.

European storage remains at unseasonably high levels going into injection season, limiting the prospects for unplaced cargoes clearing there. Interest in Europe-sourced cargoes has also begun to emerge again due to the difference in price between Northwest European markets and other demand destinations.

Most recently, Britain's BP reloaded a cargo from Belgium's Zeebrugge terminal that is currently in transit to Italy. Further interest in FOB Europe cargoes continued to be heard, according to market sources.

The Platts GCM was assessed at $1.30/MMBtu, representing the value of cargoes loading from the USGC in July. Though this is an improvement on the value that was expected for June loading cargoes, it is still below the value of the equivalent NYMEX Henry Hub futures prices.

In the US, cash Henry Hub fell 6.50 cents at $1.53/MMBtu on June 1, according to preliminary settlement data, which would be a two-month low if it held to final settlement. Cash Henry Hub last settled lower on April 2 at $1.445/MMBtu, which was the location's lowest price in over 20 years. Cash Henry Hub has settled below $1.55/MMBtu only four times previously in the last decade.

Elsewhere in the Southeast, spot gas prices were also trading lower on June 1, ranging between $1.40-$1.55/MMBtu. The NYMEX Henry Hub prompt-month contract settled 7 cents lower at $1.78/MMBtu.