The amount of natural gas flowing on pipelines to U.S. LNG export plants plunged to a 13-month low in June, a signal of weak worldwide demand due to government lockdowns to stop the spread of the new coronavirus.
Worldwide LNG prices collapsed to record lows in Europe and Asia in recent weeks due to oversupply of natural gas, even though consumption has remained stronger than that of travel restriction-depressed gasoline.
U.S. prices are less favorable than in the past, making it less attractive for overseas buyers. Buyers in Asia and Europe have canceled over 20 U.S. LNG cargoes for both June and July, with more anticipated.
The amount of gas flowing to U.S. LNG export plants fell to 3.7 Bcf/d on June 1 and was on track to fall further on June 2, according to data from Refinitiv.
"We’ve been bearish on U.S. LNG feed gas demand, but yesterday’s level still caught us by surprise," U.S. financial services firm Tudor, Pickering, Holt & Co. said in a note.
U.S. gas futures at the Henry Hub in Louisiana have traded higher than European benchmarks since the end of April and were expected to remain more expensive through at least September.
Cheniere Energy Inc.'s U.S. LNG export terminals at Sabine Pass in Louisiana and Corpus Christi in Texas saw the biggest fall in flows. Cheniere, the biggest U.S. LNG exporter, said it does not comment on its operations.
LNG feedgas flows hit a record 8.7 Bcf/d in February before most government-imposed lockdowns.
Analysts at Energy Aspects said they expect around 125 U.S. cargoes to be shut-in this summer.
“We expect underutilization of U.S. terminals to continue for several summer months as margins remain negative for many companies," said Wood Mackenzie research director Robert Sims.
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