Sources expect higher July cancellations from US

Ruth Liao

20-May-2020

HOUSTON (ICIS)–The number of July cancellations from US LNG plants are estimated to range between 30 and 40 cargoes, according to market sources in the Americas.

Cheniere’s offtakers were obliged to give notice on 20 May for July loadings from either Sabine Pass or Corpus Christi.

However, out of the 30 to 40 cargo cancellation range, at least some cargoes are expected to come from Cameron LNG, which so far has remained steady in production, as well as Freeport LNG, which already has seen curtailed production this month.

Sources representing both producer and offtaker companies from the US said cancellations would likely continue through October, considering that US Henry Hub forward spreads are uneconomic compared with European hub prices.

However, beyond July cargo cancellations, all other potential cancellations for August and beyond should be considered as rough estimates.

“[The] physical [market] doesn’t have to decide just yet,” said one source.

Already, production from the US has seen a sharp decline since March, what some sources said is beyond what could be considered seasonal adjustments in utilisation rates.

There were 72 cargoes that loaded across Sabine Pass, Cameron, Freeport, Cove Point and Corpus Christi in the month of March, according to LNG Edge.

In April, there were 61 cargoes that loaded from the US.

So far for the month of May, as of 20 May, which has 10 more loadings day left, there have been 37 cargoes loaded from US LNG plants.

However, sources said looking at loading figures year over year comparison would not be an accurate comparison, given the ramp-up of new US LNG trains in 2019, particularly with the start of Freeport LNG and Cameron LNG trains 1 and 2 toward the second half of the year.

In April 2019, for example, there was 37 cargo loadings, compared with 61 cargoes that loaded this year, which was 65% higher given the new production from Cameron and Freeport.

Companies that are expected to have cancelled cargoes include those that had been cited in June cancellations , which include end-user utilities, offtakers with secondary agreements from US plants, portfolio sellers and trading houses.

As many as 20 to 30 cargoes were heard cancelled for June cargoes.

However, companies that are considered more conservative such as South Korean incumbent KOGAS and India’s GAIL have not been heard among the cancelled cargoes for June or July.

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