When the Asia Vision tanker docked in Brazil in March 2016, it was carrying the first LNG produced in the US from shale gas -- a cargo that was described at the time as being sold at a market price.
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Five years later, amid record spot prices for shipments to Asia and Europe, Brazil, even with premiums compared with other fuel sources that it was paying, accounted for more LNG cargo deliveries from the US than any other country during the third quarter that ended Sept. 30, S&P Global Platts Analytics data show.
Far behind Brazil were the world's three biggest LNG importers -- all in Asia -- as market fundamentals aided a shift, at least temporarily, in trade flows from the US Gulf and East coasts. The latest run-up in prices, which may persist for a few more months, has been sparked by severe tightness in the European gas market coinciding with concerns in the Asia-Pacific region over LNG inventory levels ahead of winter.
As of early afternoon Sept. 30, Brazil had received 32 US LNG cargoes during the third quarter, matching its total for all of 2020, according to Platts Analytics. China and South Korea were tied for second among top destinations for US cargoes, with 19 apiece, followed by Japan with 11. Next were Spain, Chile and India with nine each. There were 81 US cargoes on the water as of early afternoon Sept. 30.
The disparity between Brazil and the Asian importers was such that small adjustments that might occur in the days surrounding the end of the quarter were likely to be inconsequential.
The figures marked a significant turnabout from the same period in 2020 -- during some of the worst economic impacts from the coronavirus pandemic – when South Korea was the top importer of US LNG cargoes in the third quarter, followed by Japan and China. Brazil received only one US LNG cargo in last year's third quarter, the data show.
Platts JKM for November was assessed at $34.47/MMBtu Sept. 30, the highest level for the LNG benchmark for Asian spot LNG since it was launched in early 2009. In Europe, Platts assessed the Dutch TTF November contract Sept. 30 at $30.963/MMBtu, almost seven times higher than what it was assessed at on the same day a year earlier. The previous JKM record, set in January, was driven by a different set of fundamentals.
In the near term, market participants fear that colder weather across the north Asia, or JKTC, region during the winter season could exacerbate the tight cargo supply situation there. In the Atlantic, trader activity remains low amid volatility in global spreads, as well as underlying TTF values.
US Henry Hub has jumped, too. The full winter strip -- November through April -- averaged $5.57/MMBtu Sept. 30, more than double year-ago levels. That has prompted a group of industrial manufacturers to ask Washington to limit US LNG exports and put a hold on some pending export project authorizations. Some market observers questioned the reasoning for such a move, and others saw it as unlikely to occur.
The notable shift in the flow of US LNG cargoes to Latin America, and Brazil in particular, isn't just about the trajectory of end-user spot prices in what are traditionally the biggest import markets. Regional dynamics are also at play.
The severe drought that's left Brazil's hydroelectric dam system with reservoirs at record-low levels is contributing to the country's more expensive appetite for LNG. Petrobras expects LNG imports to jump to 101 cargoes this year from 44 cargoes in 2020.
About 70% of Brazil's electricity is generated by hydro. There are fears of blackouts in Latin America's largest economy for the first time in two decades.