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No US LNG cargoes canceled from Cheniere terminals for December: sources

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No US LNG cargoes canceled from Cheniere terminals for December: sources

Highlights

First time since pandemic impact began in March

Prices spur utilization boost at Gulf, Atlantic facilities

Houston — Cheniere Energy, the biggest LNG exporter in the US, received no cargo cancellations from customers for December loading at its two terminals, market sources said Oct. 21.

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That's the first time that has happened since the global demand shock from the coronavirus pandemic began in March. It's a further sign of recovery due to rising prices in end-user markets in Europe and Asia.

Atlantic market participants reported hearing no cargo cancellations for December loading out of any US terminals, including Cheniere's Sabine Pass in Louisiana and Corpus Christi Liquefaction in Texas. At least 175 cargoes across the US were said to have been canceled for loading between April and November, based on an S&P Global Platts tally.

The cancellations were highest during the summer and have declined each month since as global prices have rebounded. US exporters are largely protected by fixed fees they receive when customers cancel, although cancellations force them to lower production, and if a counterparty were to claim force majeure, that could pose a challenge. Customers are generally required to provide advance notice of cancellations -- in Cheniere's case that is at least 40 days before the beginning of a given month.

Utilization at the six major US terminals on the Gulf and Atlantic coasts has been robust during the second half of October, with total feedgas deliveries recently reaching the highest level in six months as the Platts JKM – the benchmark for spot LNG prices in Northeast Asia – rallied to a one-year high of $6.613/MMBtu. The JKM for December was assessed at $6.757/MMBtu on Oct. 21. That's up more than threefold from its historic low on April 28 at $1.825/MMBtu. US feedgas demand stood at 8.6 Bcf/d on Oct. 21, Platts Analytics data showed.

The DES NWE hit a 2020 record high of $5.208/MMBtu on Oct. 20, also a 12-month record, having fallen to $1.337/MMBtu on May 28, the lowest price since Platts began assessing this market in 2010.

Despite reasonable netbacks from Europe, with cargoes being valued at or close to hub levels for December delivery, counterparties remain focused on the surging JKM market, which has been spurred by prompt supply concerns.

Despite this, US cargoes could remain bound for European shores for December delivery as a tight freight market hinders optimization opportunities to Asia.

The Atlantic and Asia Pacific day rate were assessed at $74,000 and $68,000/day, respectively on Oct. 20, having been at $62,000 and $52,000/day on Oct.1.

Those with the possibility to send December loading volume to the UK could be able to explore this option should the Asia market be inaccessible due to logistical constraints, owing to the favorable NBP/TTF spread heading into early 2021. According to Platts prices Oct. 20, the Q1 2021 UK NBP stood at a 44.4 cents/MMBtu premium to the equivalent Dutch TTF contract.

Beyond the positive impact on US terminal utilization in the near term, the overall rebound in pricing could incentivize sanctioning of new liquefaction terminals in 2021.