American Manufacturers Cut Down LNG Supplies to Europe

For the first time this year, supplies of liquefied gas to Europe on an accumulated basis began to lag behind the pace of 2019. According to European operators of LNG terminals, from the beginning of the year to September 12, the EU received 64.2 billion cubic meters of regasified LNG, which is 3.9% less than a year ago. This outcome was made possible thanks to a sharp drop in US supplies over the summer. However, in recent weeks, gas prices in the world have been growing, which may lead to an increase in LNG supplies to Europe in the fall.

In September, the volume of LNG inflows into the European gas transmission network after regasification continued to decline, which resulted in the fact that the cumulative total of LNG supplies decreased for the first time compared to last year’s rates. Based on data from European operators of LNG terminals, shipments from the beginning of the year to September 12 decreased by 3.9%, to 64.2 billion cubic meters. Last year, a record amount of LNG came to Europe – 76 million tons, or almost 99 billion cubic meters.

In the summer, LNG producers in the United States sharply reduced their output, as customers began to refuse cargo: at prices prevailing in Europe at $ 60-70 per 1,000 cubic meters, they would lose more on the sale of this gas than on obligatory payments to LNG plants. Thus, in August, operation of almost all American LNG plants, with the exception of Dominion Cove Point, was well below 50%. And at the end of the month, factories in the Gulf of Mexico stopped working altogether due to Hurricane Laura; Cameron still has not resumed it due to an external power outage.

Nevertheless, in the fall, the American plants are expected to reach production levels close to the design levels. Platts estimates that only about ten shipments were dropped by customers in September, up from about fifty in July. According to the US Department of Energy, production will return to normal levels by November and will hold about 9 billion cubic meters in winter.

In addition, gas prices in the world are recovering everywhere: in Asia, LNG spot shipments are already trading at $ 140-150 per 1,000 cubic meters, and spot prices at the main hubs in North-Western Europe have recovered to $ 130 per 1,000 cubic meters. Right now, the cost of LNG in Asia is slightly higher, which will stimulate the arrival of additional volumes there. However, as supply volumes increase, prices are likely to level out, which could lead to significant LNG inflows to Europe at the end of the year.

source: reuters.com, bloomberg.com

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