Friday, January 8, 2021

EIA Natural Gas Weekly Update: LNG

From the Energy Information Administration:
for week ending January 6, 2021 | Release date: January 7, 2021

In the News:
U.S. LNG exports set another record in December

U.S. exports of liquefied natural gas (LNG) set a new record in December after a record-breaking November 2020, averaging 9.8 billion cubic feet per day (Bcf/d), according to the U.S. Energy Information Administration (EIA) estimates based on the shipping data provided by Bloomberg Finance, L.P. U.S. LNG exports in December were more than three times higher than the reduced export levels in the summer of 2020.

Several factors have contributed to higher levels of U.S. LNG exports in recent months. LNG demand increased due to colder-than-normal winter temperatures in key Asian LNG-consuming markets. Moreover, supplies of LNG decreased because of unplanned outages at LNG export facilities in Australia, Malaysia, Qatar, Norway, Nigeria, and Trinidad and Tobago. Reduction in LNG supply led to higher international natural gas and LNG prices in Asia and Europe, attracting higher volumes of flexible LNG supplies from the United States.

From April to July 2020, natural gas and LNG prices in Asia and Europe have declined to all-time historical lows, which affected economic viability of flexible U.S. LNG exports and led to numerous cargo cancelations. Prices began to recover in August, and by December, prices have more than quadrupled compared to the low levels of the summer months. The JKM price benchmark (representing spot and forward LNG prices in Japan, South Korea, Taiwan, and China) averaged $10.82 per million British thermal units (MMBtu) in December 2020, and the TTF—a key European price benchmark—averaged $5.80/MMBtu. By the end of December, JKM prices continued to increase and reached $15.10/MMBtu on December 31, 2020—the highest level in the last seven years, according to pricing data provided by S&P Global Platts.

Since mid-October, natural gas and LNG prices in global spot and futures markets have exceeded prices in crude oil-indexed long-term LNG contracts. Although deliveries under long-term contracts (which account for 70% of global LNG trade) have been increasing since September 2020, supply shortages caused by unplanned outages at various LNG export facilities worldwide reduced contractual export volumes. Higher global prices and reduced exports under term contracts resulted in higher export volumes of flexible LNG, particularly from the United States. The majority of U.S. LNG export contracts do not have fixed destinations in contractual clauses, allowing exporters of U.S. LNG to ship it on a spot and short-term basis to the highest-priced markets worldwide. Since June 2020, more than 50% of U.S. LNG exports went to countries in Asia, about 30% to countries in Europe, and the remaining volumes to countries in the Middle East, Africa, and Latin America, according to the U.S. Department of Energy’s LNG Reports and EIA’s data for November 2020.

EIA expects U.S. LNG exports to remain at record-high levels this winter. In the December 2020 Short Term Energy Outlook (STEO), EIA forecasts that U.S. LNG exports will average 9.5 Bcf/d in the first quarter of 2021 and 8.5 Bcf/d on an annual basis this year, a 30% increase from 2020....