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Analysis: Cargo cancellations drive steep drop in feedgas demand at US export terminals


July feedgas averages 3.2 Bcf/d, lowest in 22 months

Henry Hub cash rises 17 cents on stronger power burn

Gulf Coast to JKM price spreads weaken for Aug, Sep

Denver — Feedgas demand at US LNG terminals is averaging its lowest in 22 months this July as cargo cancellations at facilities across the Gulf Coast continue to pressure the domestic gas market.

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Month-to-date, feedgas consumption is averaging just under 3.2 Bcf/d, down from record highs at over 9.6 Bcf/d as recently as late March, data compiled by S&P Global Platts Analytics shows.

On July 6, cash prices at the Henry Hub were up nearly 17 cents to $1.70/MMBtu, according to preliminary settlement data from S&P Global Platts. At Florida's Turkey Point Nuclear Plant, two reactors came offline July 6, likely supporting regional cash prices amid stronger gas-fired power burn, which edged up 300 MMcf on the day to about 12.1 Bcf/d.

While strong summer power burns and lower production have offered some support to the market recently, cash prices have yet to meaningfully recover from a 20-year low at $1.38/MMBtu on June 17.

In July and August, an estimated 80 LNG cargo cancellation are likely to keep pressure on the market.


Weaker liquefaction activity recently has been led by Cameron LNG, where deliveries are down about 1 Bcf/d over the past 10 days to an average 920 MMcf/d this month. In Texas, demand at Cheniere Energy's Corpus Christi terminal has fallen about 400 MMcf/d over the same period to an average 250 MMcf/d in July. At the nearby Freeport terminal, volumes are down 170 MMcf/d since late June.

Deliveries to Sabine Pass are nearly steady around 1.2 Bcf/d over the past two weeks. Dominion's Cove Point terminal in Maryland has continued operating at over 90% capacity recently, while a slow startup at Kinder Morgan's Elba Island has kept deliveries there at nominal levels around 100 MMcf/d in July.


As the US gas market enters its peak summer season, continued pandemic-related demand weakness from the export and industrial sectors has outweighed recent supply reductions from production curtailments and a slowdown in drilling activity.

According to a recent forecast from Platts Analytics, US LNG feedgas demand is likely to remain at or near current levels around 3 Bcf/d through the summer months before staging a recovery in September. At the same time, US industrial demand is likely to continue trailing year-ago levels by 5% to 6% this year amid a projected long road to full recovery by first-quarter 2021.

US gas production, meanwhile, is expected to recover rapidly this summer, rising to 90 Bcf/d in August. Already this month, production has edged up to an average 87.5 Bcf/d – up sharply from a recent low at 85.3 Bcf/d, Platts Analytics data shows.


Recently, the near-term outlook for US LNG exports to Northeast Asia has weakened considerably. At $2.18/MMBtu, JKM August swaps are currently trading at a 38 cents discount to the delivered cost of NYMEX Henry Hub gas – down from a 10 cents discount just one week ago. For September, JKM swaps are priced at a 5 cent discount to delivered Henry Hub.

Over the past week, though, the JKM premium for October and November has simultaneously widened about 10 cents, with the two months now trading at 40 cents and 74 cents, respectively, over NYMEX Henry Hub gas plus freight cost.