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Analysis: Deeper US LNG cancellations in July fail to alter exports to Europe

Highlights

Second successive year-on-year drop in imports

Growing multitude of spot purchases, including Greek reloads

Russian exports fall on Yamal maintenance, Asia deliveries

London — Shipments of LNG from the US to Europe have somehow sustained during July, despite a greater magnitude of contractual cancellations compared to the previous month, data from S&P Global Platts Analytics shows.

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Approximately 45 cargoes were canceled by global LNG players for July delivery, but imported volumes into Europe's key trading hubs marginally increased compared to June receipts subject to 20 such cessations, which mean that US exports to the region could sustain at the current level for the balance of summer.

Out of the 4.76 million mt of global LNG shipped to France, Spain, Italy, Belgium, the UK and the Netherlands -- equating to 6.568 billion cu m of natural gas equivalent -- just 14% came from the US, which essentially sustained its market share compared to June.

However, the US has lost its market leadership in the region, which it had held as recently as March, as a direct result of widespread cancellations of cargoes. It enjoyed twice the market share in March than it does now.

Overall, monthly European LNG imports ticked up slightly, rising 5.5% month on month, but endured their second successive year-on-year drop after uninterrupted increases since Europe's LNG import surge began in October 2018. Aggregated imports were nevertheless over 1.5 Bcm higher than they were in July 2018.

Qatar held on to its market leadership by some distance, with 39% of all Europe's imports sourced from the country. Production, as promised by Qatar's energy ministry, remains typical for the time of year despite a global surplus and compressed prices.

All things considered, US LNG cancellations may not alter Europe's imported volumes too drastically for August and September, given that the respective 45 and 25 reported cancellations for these upcoming delivery periods may translate into consistent volumes as they have during the last two months.

Spot the difference

As demand for natural gas and storage injection begins its slumber amid summer temperatures and 85% storage fullness in Europe, Europe is still picking up spot cargoes from around the world in places where pockets of genuine demand still exist.

Indeed, it would not be too much of a stretch to assume that some of July's US exports may have been topped by spot sales outside of longer-term agreements.

Spain was the top importer of LNG in July, owing to its traditional demand for gas-fired power generation and lack of pipeline connectivity. It captured 31% of all shipments to European key trading locations, picking up the most US cargoes and topping up supplies from a geographically diverse range of sources, including a reload from Greece.

Fellow Mediterranean hub Italy welcomed its highest imports since December 2018, and was the second largest importer in July with a 23% share.

Like Spain, Italy heavily relies on gas-fired power, and faces a tricky August-delivery period with potential upstream supply changes, as LNG imports have helped shrink the PSV premium to the TTF, as Slovakia prepares for exports.

Elsewhere, Belgian LNG imports hit their lowest level since February 2019, while the UK received less than 1 Bcm of natural gas equivalent for the first time since August. Dutch receipts at Gate rose and French imports edged higher thanks to Russia targeting these markets.

Russia experienced a drop in its total exports, as maintenance on Yamal liquefaction trains took place. Monthly production from this facility was down by 37% on the year at 1.6 Bcm of natural gas, with 297 million cu m dispatched eastward toward Asia.

EUROPEAN LNG SOURCING
(no. of shipments)
DELIVERY: UK
May-20
Jun-20
Jul-20
TOTAL
DELIVERY: FRANCE
May-20
Jun-20
Jul-20
TOTAL
United States
0
0
0
0
United States
2
0
1
3
Russia
2
1
0
3
Russia
7
6
6
19
Qatar
12
7
5
24
Qatar
3
1
1
5
Nigeria
1
0
0
1
Norway
1
1
1
3
Trinidad and Tobago
1
0
0
1
Nigeria
8
0
2
10
Norway
0
0
1
1
Algeria
7
4
0
11
TOTAL
16
8
6
Trinidad and Tobago
2
0
0
2
Angola
1
0
0
1
DELIVERY:BELGIUM
May-20
Jun-20
Jul-20
TOTAL
Greece
0
0
1
1
United States
2
0
0
2
TOTAL
31
12
12
Russia
7
4
0
11
Qatar
3
4
3
10
DELIVERY: NETHERLANDS
May-20
Jun-20
Jul-20
TOTAL
TOTAL
12
8
3
United States
2
1
2
5
Russia
4
2
4
5
DELIVERY: SPAIN
May-20
Jun-20
Jul-20
TOTAL
Algeria
0
0
1
10
United States
7
5
4
16
Trinidad and Tobago
1
0
0
1
Russia
2
3
3
8
Angola
2
0
0
1
Qatar
2
2
5
9
Nigeria
2
0
0
2
Trinidad and Tobago
3
2
1
6
TOTAL
11
3
7
Norway
1
1
0
2
Nigeria
6
2
3
11
DELIVERY: ITALY
May-20
Jun-20
Jul-20
TOTAL
Algeria
0
1
1
2
United States
1
3
3
7
Angola
0
0
1
1
Qatar
5
8
8
21
Equatorial Guinea
0
0
1
1
Algeria
8
7
8
23
Greece
0
0
1
1
Trinidad and Tobago
1
0
0
1
Peru
0
0
1
1
Nigeria
0
0
1
1
TOTAL
21
16
21
TOTAL
15
18
19
Note: Algerian shipment, Greek reload volumes vary
Source: S&P Global Platts Analytics