[Editor's note: This story was updated at 12:23 p.m. CT June 23.]
Buyers of LNG are expected to cancel 40 to 45 cargoes for August loading from the U.S. due to a slow recovery in Asian gas demand and record-high European gas stocks, market sources said June 22.
The exact number of cancellations is yet to be confirmed as the deadline of some projects is on June 22, but six of the sources said they expected the number of August cancellations to be close to 40 to 45 cargoes, the same number that was canceled for July loading.
That followed at least 20 to 30 U.S. LNG cargoes canceled for June loading after the coronavirus pandemic hit gas demand globally, causing gas and LNG prices to plummet.
The premium of gas prices in Europe over the U.S. Henry Hub remains too tight to deliver U.S. cargoes with a profit, sources said.
The August contract on the Dutch gas hub was trading around $0.10/MMBtu above the Henry Hub for August on June 22.
"At those levels, European buyers are looking at a loss of over $5 compared with just paying a cancellation fee of $3-$3.50," a trader with knowledge of the matter said.
Another trade source said that close to 30 cargoes were likely canceled from Cheniere Energy Inc.'s plants, Sabine Pass in Louisiana and Corpus Christi in Texas.
Up to 10 cargoes could have been canceled from the Freeport plant in Texas, the source said, adding that there were likely cancellations from other U.S. projects as well, with a total of around 45 cargoes canceled.
Some sources said, however, that loading a cargo in August might make more sense compared to June and July, as there was a price contango between August and forward months, with shipping rates low.
But finding a ship for autumn months could be difficult, a trader in Europe said.
Cheniere declined to comment on the cancellations but a company representative said "the flexibility inherent in our LNG contracts—destination flexibility and the option to not lift cargoes, but pay the liquefaction fee—helps our customers effectively manage their energy portfolios through market cycles, while still providing Cheniere with reliable cash flow."
Freeport LNG said it does not comment on the activity of its customers' cargoes.
Here’s a snapshot of recent energy deals including the acquisition of Dominion's natural gas transmission and storage segment by Warren Buffett’s Berkshire Hathaway in a transaction worth nearly $10 billion.
Here’s a quicklist of oil and gas assets on the market including the sale of operated properties in South Texas as part of a regional exit by Blackbeard Operating.
Blackbeard Operating retained TenOaks Energy Advisors as its exclusive adviser in connection with the sale of its operated properties in South Texas as part of a regional exit.