Global gas prices teeter above record lows on virus optimism, weather
Global gas prices in late June are up from record lows amid a recent but modest uptick in demand, fueled by easing virus-related lockdowns and rising summer temperatures.
In Northeast Asia, news of recent US LNG cargo cancellations has done little to relieve the pressure on import prices. On June 24, the JKM settled in the low-$2/MMBtu area where it has continued to hover recently amid limited demand from only a handful of end-users in China, Japan and South Korea.
In Europe, benchmark Dutch TTF month-ahead gas prices have rebounded from record lows in late May to the upper-$1/MMBtu level recently, supported by bullish weather forecasts and a planned maintenance in July on the Nord Stream pipeline that’s expected to cut capacity to zero.
In the US market, record pre-summer power burns have offered some support to cash and prompt futures prices. The uplift to demand from power generators, though, has been largely offset by a slow recovery in the industrial sector and weak LNG feedgas demand tied to recent cargo cancellations.
“The greater than expected US cargo cancellations have put pressure on the US Henry Hub, while at the same time starving global LNG markets of spot supply,” said Ross Wyeno, lead analyst, Americas LNG, S&P Global Platts Analytics. “This has had the overall effect of strengthening forward netbacks, which now look as though they could break back into positive territory by late-summer.”
• The Platts JKM settled at $2.13/MMBtu on June 24. The benchmark Northeast Asia spot LNG import price has averaged just $2.10/MMBtu this month, up from a record-low $1.83/MMBtu in late April.
• JKM derivatives are pricing in a stronger market for the autumn months, with the September and October swaps settling June 24 at $2.63/MMBtu and $3.03/MMBtu, respectively.
• Europe’s benchmark Dutch TTF settled at $1.883/MMBtu on June 24, up about 65% from a record-low settlement in late May amid rising temperatures and lower LNG supply.
• US Henry Hub prompt-month futures settled at $1.60/MMBtu on June 24. In the past month, the benchmark index has hovered just above a record low at $1.55/MMBtu on April 2.
• The Henry Hub balance-2020 forward curve settled at an average $1.91/MMBtu on June 24 – its lowest in just over three months.
• More than 40 LNG cargoes scheduled to be loaded in August at US export terminals were canceled by customers, similar to July figures, market sources said. That new cancellations push the summer total over 100.
• US LNG feedgas deliveries are averaging 4 Bcf/d month-to-date, down from record levels at over 9.5 Bcf/d in late March. Recent cargo-lifting cancellations are likely to continue severely limiting gas demand at US export terminals this summer. On June 24 feedgas was estimated at 4.6 Bcf/d
• Fewer loadings at US liquefaction terminals are affecting tanker operators, which report deals with charterers falling apart when buyers can’t be found.
• Without a strong recovery in global economic activity, LNG demand will take some time to recover, reflecting lower consumption in key Asian markets, according to Poten & Partners. A demand bounce from countries ending virus-related lockdowns may be short-lived, it says.
• US gas production appears to be stabilizing in late June, averaging 87 Bcf/d over the past week – up from a 21-month low at 85.4 Bcf/d on May 21.
• Continental Resources on June 18 said it would restore some 75,000 to 100,000 b/d of curtailed oil production in July, lifting associated gas output in the Bakken Shale and SCOOP/STACK.
• The US’ largest gas producer, EQT, is also likely to restore some 1.4 Bcf/d in curtailed output next month after reiterating full-year production guidance at 1.45-1.50 Tcfe for 2020.
• Current Platts Analytics forecasts show US production rising to a balance-of-year high at 90.3 Bcf/d in August, before easing through the fourth quarter.
• US gas in storage was estimated June 18 at 2.892 Tcf for the prior week, 419 Bcf above the five-year average. Over the next three weeks, the surplus is forecast to continue rising.
• The US rig count fell to 292 on June 17, setting a fresh record low, data from Enverus shows.
• Freeport LNG has delayed its target for making a final investment decision on a fourth liquefaction unit at its Texas export facility until at least 2021, citing market challenges.
• Venture Global LNG has started installing the first heat exchangers, or cold boxes, for the liquefaction units that will be used at its Calcasieu Pass facility in Louisiana.
• It is unlikely any more North American LNG export projects will secure financing for construction in the next five or six years, according to the latest Platts Analytics outlook.
• In Mexico, Sempra Energy’s Energia Costa Azul had been targeting FID by the end of June but recently cautioned that receipt of a key permit could be slowed due to the virus.
• Engineering firm KBR is pulling back from entering into lump-sum construction services for energy projects such as liquefaction terminals, partly blaming the virus for the decision.