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Highlights

Cash Henry Hub last settled lower in 1998

US LNG feedgas falls to 14-month low of 3.72 Bcf

New York — Cash Henry Hub and other US Southeast physical gas benchmark prices fell June 16 to their lowest levels in over 20 years, with US LNG feedgas deliveries at a 14-month low on weak global market dynamics.

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Cash Henry Hub settled at $1.38/MMBtu on June 16, which is location's lowest settlement price since it fell to $1.01/MMBtu on December 3, 1998. For context, the December 3, 1998, settlement is cash Henry Hub's all-time lowest recorded settlement price.

Spot prices across the US Southeast fell to their lowest price in over 20 years on June 16. Columbia Gulf mainline and Transco Zone 4 were both plunged to their lowest levels since December 3, 1998, at $1.285/MMBtu and $1.36/MMBtu, respectively.

The weakness was felt in the futures market as well as the physical. NYMEX July, the current prompt-month futures contract, settled 5.5 cents lower at $1.614/MMBtu, the lowest prompt-month price since May 13, 2020.

The largest factor in the June 16 price drop was likely weakening US LNG feedgas demand, especially in the US Gulf Coast export facilities. Total LNG feedgas deliveries fell to a 14-month low of 3.72 Bcf on June 16, according to S&P Global Platts Analytics data. This is a steep drop compared to the May average of 6.7 Bcf/d and April average of 8.27 Bcf/d.

Globally, LNG demand has been hard hit relative to available supply due to measures aimed at slowing the spread of the novel coronavirus. Over the past two months, both the Platts Japan Korea Marker and the Platts Northwest European Marker hit record lows as a result of the supply demand imbalance, falling to $1.825/MMBtu and $1.337/MMBtu, respectively.

The flexible nature of US LNG supply has led to it being one of the hardest hit exporting countries in recent months, with more than 35 cargoes expected to be cancelled for June and potentially more than 45 cargoes in both July and August, according to reports from trading sources. Even exports for May have been noticeably curtailed relative to average monthly exports for Q1, with only around 52 cargoes loading, compared to an average of 72 per month at the start of the year.

The curtailment in exports has been driven by poor economics, with the value of a spot cargo loading in the US Gulf Coast trending below the approximate cost of feedgas since late March. The Platts Gulf Coast Marker was most recently assessed at $1.625/MMBtu on June 15, which was still below the equivalent NYMEX Henry Hub Futures price of $1.669/MMBtu. This comparison, however, does not consider the feedgas attrition rate during the liquefaction process, which would further dampen spot break even economics.

The current GCM-HH spread of less than 5 cents/MMBtu is, however, the narrowest it has been since mid-May, and could help to improve US export figures should the trend continue.