USA LNG Cargoes Poised to Shift to Asian Ports

LNG cargoes from the U.S. are poised to shift to Asian ports as prices fall in Europe, a new Rystad Energy gas and LNG market update, which was sent to Rigzone on Wednesday, stated.

“Gas prices on the Netherlands-based Title Transfer Facility (TTF) fell 14 percent to around $9.4/MMBtu as of 11 July due to weak demand and healthy supply,” Rystad Energy Senior Analysts Masanori Odaka and Ade Allen said in the update.

“In Asia, spot LNG prices are fluctuating around $11/MMBtu for August delivery as of 11 July, with the monthly average expected to settle at $12/MMBtu or slightly below. This has incentivized some players with U.S. free on board LNG cargoes to direct their LNG towards Asia rather than Europe,” they added.

“However, finding Asian importers may be difficult as some countries still face high inventory, subject to demand fluctuation during summer,” the analysts continued.

In the report, the analysts highlighted that spot LNG prices for northwest Europe delivery were about $8.9 per MMBtu on July 11, which they noted was 18 percent lower on the week. The analysts also pointed out that Europe continues to inject gas into storage, “with storage levels well above 2021 and 2022 for this time of the year”.

“Storage facilities are currently 80.1 percent full at roughly 90.9 billion cubic meters, well positioned to reach the 90 percent target before November,” the analysts stated in the update.

“The withdrawal rate is currently around 29.8 million cubic meters per day at an injection rate of 279 million cubic meters per day,” they added.

The analysts noted in the update that, in the Asian spot LNG market, several sell tenders emerged from Indonesia’s Bontang LNG for September and October delivery, “with deadlines on 11 July”.

“On the buy side, pockets of demand emerged from South Asia, while buying interest from East Asian importers remained limited despite strengthening downstream demand in some countries,” the analysts said in the update.

“China and South Korea’s LNG inventories … stay high, prompting some importers to delay the delivery of cargoes. Higher than normal inventory levels in East Asia could dissuade major purchasers in Northeast Asia from spot market purchases,” they added.

“At the time of writing on 12 July, players with U.S.-origin LNG cargoes are likely to bring their volumes to Asia rather than Europe as the arbitrage is open for September and October delivery, even when considering total shipping cost. Consequently, we will likely see more U.S.-origin LNG in Asia in the coming months,” the analysts continued.

In a portion of the update penned by Allen alone, the Rystad analyst said U.S. LNG exports averaged 1.75 Mt last week but warned that the figure could be reduced this week “due to potential issues at Sabine Pass Train 3”.

“We expect exports to average close to 13 billion cubic feet per day in July, barring unforeseen circumstances,” Allen said in the update.

“Robust exports will be necessary to keep the market balanced, especially since production remains resilient,” Allen added.

LNG Exports, USA-EU Task Force

In its latest short term energy outlook (STEO), which was released earlier this month, the U.S. Energy Information Administration (EIA) projected that gross U.S. LNG exports would come in at 12.04 billion cubic feet per day in 2023 and 13.31 billion cubic feet per day in 2024. In its previous STEO, which was released in June, the EIA anticipated that gross U.S. LNG exports would be 12.07 billion cubic feet per day in 2023 and 12.73 billion cubic feet per day in 2024.

The EIA’s latest STEO highlighted that gross U.S. LNG exports were 10.59 billion cubic feet per day in 2022.

In a joint statement on the U.S.-EU task force on energy security published on April 3, the White House and the European Commission said the task force has made major progress in meeting its goals to reduce the EU’s reliance on Russian energy.

“The United States more than doubled its target to ensure delivery of an additional 15 billion cubic meters of liquefied natural gas to the EU,” the statement noted.

“Last year, U.S. exports to the EU were 56 billion cubic meters, up from 22 billion cubic meters in 2021. The EU was the largest destination for U.S. LNG exports, accounting for more than 52 percent of supplies,” it added.

“At the end of 2022, Russian gas accounted for only 16 percent of the EU’s gas imports, down from 37 percent in March 2022,” it continued.

The statement noted that task force priorities for 2023 will include continuous assessments of LNG markets and ensuring U.S. LNG deliveries to Europe of 50 billion cubic meters this year.

“In the coming months, the Task Force will continue to work on keeping a high level of U.S. LNG supplies to Europe in 2023 of at least 50 billion cubic meters,” the statement said.

“This is necessary given the challenging supply situation and the need to ensure storage filling for the next winter 2023-24,” it added.

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