US approaches a year without any LNG cargo cancellations amid strong demand

Nearly a year has passed without US liquefaction terminals reporting any cargo cancellations amid a nearly fivefold jump in FOB Gulf Coast cargo values.

High end-user prices, low shipping rates, destination flexibility and tight global supplies have kept American output in high demand.
Market participants expected the trends to continue in the near-term, amid Russia-Ukraine tensions and uncertainty over the timing of startup of the Nord Stream 2 gas pipeline. Both issues could impact the level of gas supplies available to Europe.

“One can never be sure, but right now looking forward to the next three months, I’d say no cancellations,” an Atlantic-based trader said Jan. 31.

A second Atlantic-based trader agreed that “with the current conditions,” that was likely to be the case.

Amid the height of demand destruction triggered by the coronavarus pandemic, at least 175 cargoes were said to have been cancelled from US LNG export terminals for loading between April 2020 and November 2020, based on an S&P Global Platts tally.

There were none reported for loading in December 2020, though, according to market sources, Italian utility Enel cancelled an LNG cargo for February 2021 delivery from Cheniere Energy, which operates two liquefaction terminals and is the biggest exporter in the US. That was the last loading month for which any cancellations at US terminals were reported.

Customers are generally required to provide advance notice of cancellations from US liquefaction terminals — in Cheniere’s case that is at least 40 days before the beginning of a given loading month. US exporters are largely protected by fixed fees they receive when customers cancel, although cancellations force them to lower production.

Platts assessed the US FOB Gulf Coast Marker for March at $24.85/MMBtu on Jan. 31, down $1.80/MMBtu from the previous session. GCM was assessed at $5.055/MMBtu a year earlier.

In addition to higher prices in end-user markets, US LNG exporters have benefitted from sharply lower Atlantic and Pacific shipping costs, which have fallen about 90% since the beginning of December.

Panama Canal congestion has recently been rising, amid increased cargo activity in the Pacific. The maximum wait for unreserved LNG tankers transiting the Panama Canal stood at 14 days northbound and five days southbound on Jan. 31, according to the Panama Canal Authority.
Source: https://www.spglobal.com/platts/en/market-insights/latest-news/lng/013122-us-approaches-a-year-without-any-lng-cargo-cancellations-amid-strong-demand