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China was top destination for US LNG in November amid strong Gulf Coast netbacks

Highlights

Brazil received the most cargoes previous three months

Narrowing spreads could change trade flows again

China was the top destination for US LNG in November, after three consecutive months with Brazil receiving the most cargoes, S&P Global Platts Analytics data showed.

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The shift in trade flows came as strong US Gulf Coast netbacks incentivized deliveries to Asia even as congestion at the Panama Canal made the voyage longer and potentially more costly.

Spreads in the JKM derivatives market helped make the case for deliveries to Asia versus Europe during the month. Those spreads, however, have narrowed considerably since the start of December, suggesting the dynamics could change again.

Though market volatility has eased in recent weeks, LNG prices in key destination markets remain significantly higher than a year ago. On Dec. 3, the Platts JKM – the benchmark for spot-traded LNG delivered to Northeast Asia -- for January was assessed at $34.181/MMBtu. Platts assessed DES Northwest Europe for January at $29.512/MMBtu. For USGC cargoes loading 30 to 60 days forward, the FOB Gulf Coast Marker for January was assessed at $26.30/MMBtu on Dec. 3.

During November, 13 US LNG cargoes were delivered to China, up from nine the month before and seven during November 2020. Japan and Turkey each received nine US LNG cargoes in November, tying them for second most. Brazil, which was the top destination for US LNG In August, September and October, was tied with Spain for receiving the third-most US LNG cargoes in November, at eight. South Korea was next at seven cargoes, followed by India at four cargoes.

Because of severe drought that has drained its hydroelectric resources, Brazil has been reliant this year on LNG to help serve power demand. More than two-thirds of Brazil 's electricity is generated by hydro. In Spain, LNG demand found support after importers in late October nominated zero Algerian supplies for November via the GME pipeline through Morocco.

China, meanwhile, has stocked up well based on recent LNG deliveries, muting prompt cargo buying interest, a producer said Dec. 3.