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US liquefaction terminal utilization jumps as Asian spot prices rise to 2014 level

Highlights

Demand, tight supply, Canal delays in focus

Activity may help lift new projects off ground

Houston — US LNG feedgas demand surged Dec. 28 to near a record set two weeks earlier as spot prices for deliveries to Northeast Asia, the world's biggest import market, rose to the highest level in six years, S&P Global Platts Analytics data showed.

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The activity comes despite long wait times at the Panama Canal for LNG tankers arriving without a reservation.

Heading into 2021, US producers are being buoyed by strong market fundamentals. Peak demand and pockets of supply tightness have been bullish for prices, while high tanker charter rates have not deterred robust exports from the Gulf and Atlantic coasts.

Gas deliveries to the six major US liquefaction facilities totaled 11.41 Bcf/d on Dec. 28, up around 430 MMcf/d from the day before and the highest level since the record 11.58 Bcf/d reached on Dec. 13, Platts Analytics data showed.

The Platts JKM for February was assessed 70.3 cents/MMBtu higher day on day at $12.514/MMBtu on Dec. 28. That's the highest close for the benchmark for spot-traded LNG delivered to Northeast Asia since Oct. 31, 2014, when the price settled at $12.55/MMBtu.

JKM has seen an almost sevenfold increase since its historic low on April 28, as the initial market jolt from the coronavirus pandemic took hold, at $1.825/MMBtu.

North American LNG export developers are hoping sustained high prices will provide incentive to buyers to sign more long-term commercial deals that would enable the developers to sanction new terminal projects in 2021.

The 17 liquefaction trains across five terminals in the US, Canada and Mexico that Platts Analytics forecasts to be online in the next five years have all been sanctioned. The forecast does not include any of the more than 16 other projects that are under active development, some of which are still proposing to start up their first trains within that time frame despite having not yet begun construction.

As supply issues at overseas production facilities get resolved, some buyers are expecting prices to fall, while others remain uncertain about the trajectory in the months ahead due to supply curtailments in Australia and Malaysia.