US LNG March - April

Monday, 04 May 2020
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US LNG exports for the period covering March and April stood at 9.19mmt with a delivery horizon of 4th June at the time of writing. Meanwhile, average capacity utilisation for the period remained high at 98%. However, US LNG exports saw negative growth of 0.22mmt (-2.3%) compared to the period of January- February.

The period decline was predominantly d ue to performance in April, when US LNG shipments retreated by 0.69mmt (-14%) m/m. We observed a similar pattern in the previous two-month period when shipments from January to February decreased by 0.54mmt (-11%). Nevertheless, our data shows the m/m decline has accelerated in the March-April period. Whilst capacity utilisation remained well above 90% if not above nameplate between January and March, it had decreased by c. 15pp to 90% m/m in April. We submit the shorter length of April was not a decisive factor as at the time of writing our shipping data only indicated the potential for one additional export if the month had been longer.

Notably, US LNG saw an uplift in prospects with the first shipments to China in over a year taking place in between 21st March and 7th April. At the time of writing, the shipments comprised two cargoes likely sold by Cheniere out of its Corpus Christi and Sabine Pass contingent as well as one each by Tokyo Gas, Naturgy, BP and Total, with the lion share bought by CNOOC, our analysis suggests. In our view, PetroChina is also going to be among the buyers via its Hong Kong listed subsidiary Kunlun Energy. Three of the six cargoes were still in transit at the end of April. A seventh cargo aboard the RWE-controlled Palu LNG originally left Corpus Christi LNG for Tianjin on 24th March but has since been diverted and is currently waiting off Singapore.

However, whilst the restart of exports to China may constitute a highlight for US LNG sales in March-April, in our view US LNG is beginning to strain under the prevailing demand retreat record low prices. Public health measures in response to the spread of COVID-19 are weighing on demand. As such we highlight that despite the quick rebound of China’s PMI in March, China’s economic growth in 2Q – and by extension LNG demand growth – is looking highly uncertain to us. Economic data for 1Q 2020 published by the National Bureau of Statistics shows quarterly utilisation of industrial capacity plunged by more than 10pp over 4Q 2019 and by 8.9pp over the same period last year. Heavier, more energy intensive industries were hardest hit, which does not bode well for national energy consumption.

As such, Europe is set to remain a significant sink for US LNG volumes led by Turkey and the United Kingdom, in our view.

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