Europe Continues to Gain U.S. LNG Cargoes

U.S. LNG exports have climbed from zero to about 6 Bcf/d in less than four years. This year to date alone, three new liquefaction trains have come online at three different terminals with an additional train at Freeport LNG and Elba Liquefaction’s first four mini-trains in the commissioning process. The completion of these and other projects around the globe, particularly in Australia, have led to an oversupplied global market, made worse this year by a mild winter and high natural gas storage levels in Europe, and nuclear restarts and slowing demand growth in Asia. These dynamics sent international prices spiraling downward in recent months. Then, in September, prices briefly spiked up as regulatory news out of Europe suggested higher global gas demand. In the midst of all this market turmoil, U.S. export cargoes have remained unfazed. But the shifting fundamentals have played a role in where U.S. cargoes ultimately end up. Today, we begin a series looking into how liquefaction capacity contracts and international prices affect cargo destinations from U.S. LNG terminals.

U.S. LNG exports in recent months have gone from providing a consistent and growing source of demand to balance the U.S. natural gas market to now being a drag on demand growth and the gas market balance. Rising storage surpluses and record low prices in Europe and Asia, along with relative strength in the U.S. national benchmark prices at Henry Hub, have turned the economics upside down for U.S. exports and led to widespread cancellations of contracted cargoes. Feedgas deliveries and cargo liftings at Lower-48 terminals both have plummeted to the lowest levels since early 2019, despite domestic liquefaction capacity climbing by more than 4 Bcf/d since then. Moreover, the dynamics that led to the current predicament are likely to persist at least through injection season and potentially even beyond that to a certain extent. Today, we provide an update on how cargo cancellations have affected U.S. gas demand for exports, overall and at individual terminals.