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Asian prices supportive of further US LNG export activity increase in December

Highlights

Total liquefaction feedgas demand near new record

Gulf Coast netbacks strengthen with demand

Houston — US LNG feedgas demand could hit new highs in December amid favorable netbacks and no cargo cancellations, according to S&P Global Platts analytics data.

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Flows to the six major export terminals totaled 10.6 Bcf/d Nov. 30, slightly below the current record of 10.7 Bcf/d set on Nov. 13, Platts Analytics data show.

With further ramp-up possible at Cheniere Energy's Sabine Pass terminal in Louisiana and one of the 10 trains at Kinder Morgan's Elba facility in Georgia still down due to a May fire, there is room for total flows to increase to closer to 11 Bcf/d in the days and weeks ahead.

Robust demand in the key Asian import market is supportive of increased activity.

The Platts JKM for January was assessed 25.7 cents/MMBtu higher day on day at $7.775/MMBtu on Nov. 30.

While some production uncertainty remained, the market was said to be divided on how much higher this could cause spot prices to go up. Still, JKM, the benchmark for spot LNG prices in Northeast Asia, has seen a more than fourfold increase from its historic low on April 28 at $1.825/MMBtu.

US LNG exports have picked up considerably over the past month, led by the strong uptick in JKM that has pulled the US Gulf Coast LNG netback up to a year-to-date high of $2.59/MMBtu.

The JKM is now trading at a roughly $2/MMBtu premium to the Dutch TTF on a US netback basis, suggesting that the Asian markets will continue to attract cargoes and could keep volumes flowing to Europe subdued below last year's levels.

While US LNG export activity has recovered from the demand destruction during the spring and summer due to the coronavirus pandemic, a resurgence in cases could impact the market in the months ahead, depending on the extent of new lockdowns. At least 175 cargoes across the US were said to have been canceled for loading between April and November, based on a Platts tally

Beyond the positive impact on US terminal utilization in the near term, a continuation of the overall rebound in pricing will be critical to incentivizing the sanctioning of new liquefaction terminals in 2021.