Cancellations of U.S. LNG cargoes are starting to take a toll on Lower-48 natural gas demand. Feedgas flows to U.S. terminals last week fell to as low as 5.76 Bcf/d, down from the daily peaks above 9 Bcf/d seen as recently as April and the lowest since October 2019. While some of the slowdown may be attributable to domestic outages or maintenance on feeder pipes — or short-lived marine channel weather conditions — the bulk of it is a precursor to the first big round of cancellations by offtakers for June liftings. This, as COVID-related demand destruction and the resulting supply glut in the past month have collapsed what already were weak economics for exporting U.S. LNG to Europe and Asia, wiping out offtakers’ margins for delivery into those markets. Nevertheless, many cargoes will continue to move. What drives offtakers’ decision of whether to lift or cancel cargoes? Today, we wrap up a short series looking at the market and logistical dynamics forcing cancellations, as well as some of the mitigating factors that could prop up cargo liftings more than you’d expect in the current environment.
Break It to Me Gently, Part 2 – The Impacts of U.S. LNG Cargo Cancellations
