LNG: European Natural Gas Storage Filling Up

Following up on an out-the-door comment after the EIA natural gas storage report: "Filling that gap-up from May 1st would be a very good opportunity to enter or re-enter on the long side." when the futures were at 1.916 was almost prophetic but not quite. And I don't know if close is good enough.

On the 30-minute chart below the gap-up begins with the last print at 1.878 on Sunday the 3rd while today's low print was 1.886, missing a complete fill of the gap by 8/10 of a penny.

And the reason this nit-picky entrail-reading might be important? See after the chart.

From OilPrice, May 6:
Is This The End Of The LNG Boom?
The glut of natural gas could lead to more cancelled LNG exports in the next few months.

“It is clear that yes we face today people talk lot about the oil market, but the gas markets are suffering a lot,” the CEO of Total SA, Patrick Pouyanne, told investors and analysts on an earnings call on Tuesday. “We are on the way to, I would say, cancel some of the of the LNG tankers during summer time in order to limit some losses.”

Global LNG supply is expected to rise to 380 million tonnes in 2020, up 17 Mt from a year earlier, according to data from Rystad Energy. However, demand will rise by a relatively modest 6 Mt, putting total demand at 359 Mt for the year.

Two obvious things stand out from those numbers. There was an oversupply problem heading into 2020, even before taking the global pandemic and economic downturn into account. Second, the supply overhang will be made worse this year as new additions exceed demand growth.
The market can often digest excess gas, either by burning more for electricity or putting more in storage. “But in 2020, when ample LNG supply is coupled with demand destruction, prices have already hit record lows and storages have already filled faster than usual. Production shut-ins are becoming a realistic possibility,” Rystad Energy said.

Europe has often soaked up excess cargoes, but storage is much higher than usual, leaving little room for extra shipments. That has LNG prices in the Netherlands (a key price marker for Europe) trading below $2/MMBtu. A recent report found that the economics of the LNG market are “imploding.”
“European storage could reach its limit and LNG cargoes with deliveries in the summer months are at risk of being canceled,” Rystad said.

The problem is similar in the U.S. – tepid demand and high inventories. Natural gas prices in the U.S. have also traded below $2/MMBtu for much of 2020, although prices have edged up recently. A depressed economy and weak prices have walloped coal, which is now generating less electricity in the U.S. than renewable energy.

At least 20 LNG cargoes have already been cancelled, according to an April 22 report from Reuters. “[T]hese cargos are unlikely to get placed by other entities since export economics are so far out of the money,” Bank of America said. “Although earlier than we expected, we are not surprised that US LNG exports are getting cancelled, and expect more cargos get cancelled in subsequent months.”...

....MUCH MORE

In Wednesday's "Natural Gas: Yikes!" the outro comment was on the last three weeks of LNG exports from the U.S.:

April 16—61 Bcf
April 23—48 Bcf
April 30—39 Bcf

That is a sizable, persistent, and important decline in what has become a sizeable part of the weekly injection/withdrawal from storage equation.
We'll look at the EIA weekly update tomorrow but one of the factoids was the LNG shipments for the May 7 report date showed the first increase in almost a month:

U.S. LNG exports increase week over week. Fifteen liquefied natural gas (LNG) vessels (six from Sabine Pass, three each from Cameron and Corpus Christi, two from Freeport, and one from Cove Point) with a combined LNG-carrying capacity of 54 Bcf departed the United States between April 30 and May 6, 2020, according to shipping data compiled by Bloomberg. One vessel was loading at the Cove Point terminal on Wednesday.

That's a pretty nice tick up but the question is: is this a one-off? The start of a trend higher? Just noise in the bigger picture?
And I don't know.

We've seen no reason to change our expectation of $3.50 spot/front month this summer but the demand destruction in Europe and the fact it might snow on the U.S. East Coast this week, meaning not much call for air-conditioning, make this a tricky time to prognosticate much less bet.