Page 7 - NorthAmOil Week 14 2021

NorthAmOil COMMENTARY NorthAmOil

brunt of the drop in LNG demand caused by the preparing for next winter already.
pandemic, seeing numerous cargo cancellations Bloomberg reported this week that certain
because the nature of US contracts typically North Asian buyers were making moves to stock
makes shipments from the North American up earlier than usual. China’s Sinopec was cited
country easier for buyers to cancel. Subse- as having bought at least 35 cargoes for deliv-
quently, certain facilities on the US Gulf Coast ery between June and February, with the news
were hit by outages resulting from a particularly service reporting that other buyers in China,
active hurricane season. Further unplanned Japan and South Korea were considering similar
outages followed in February this year, when a moves, according to traders.
winter storm severely disrupted power gener- It is unusual for buyers to be stocking up on
ation and gas operations, especially in Texas. winter cargoes in April, and the move by Sino-
Indeed, certain LNG operators were asked at the pec suggests a desire to avoid the situation that
time by Texas Governor Greg Abbott to scale was seen last winter, when Asian spot prices shot
back production in order to relieve some of the to record highs after languishing at low levels all
pressure on gas-fired power generation. year.
On April 8, Reuters cited analysts as saying But Bloomberg also cited traders as saying
feed gas flows to US LNG terminals would fall to that low inventories in Europe could also con-
six-week lows of 9.1bn cubic feet (258mn cubic tinue to pull cargoes away from Asia during the The price and
metres) per day owing to planned maintenance course of 2021.
at Corpus Christi LNG. The analysts told the In a longer-term trend, the energy transi- demand spikes
news service that it was normal for maintenance tion also continues to drive the boom in LNG seen during the
to take place in the spring, when demand is typ- demand as more and more countries switch
ically lower. But Reuters also noted that so far in from coal to gas for power generation, with winter are even
April, feed gas flows had averaged 11.1 bcf (314 long-term emissions reduction targets in mind.
mcm) per day, putting them above the monthly Among these is China, whose LNG imports rose prompting certain
record of 10.8 bcf (306 mcm) set in March. more than 30% in March as the country’s new
Feed gas flows and exports of US LNG can- pipeline operator worked to open terminals to buyers to start
not rise much further after planned mainte- gas distributors. preparing for next
nance is concluded, though, as the US is now But while US producers currently stand to
producing close to its full capacity, and more benefit from these various demand trends, there winter already.
trains are not due online until 2022, or possibly are also warnings that they will see rising levels
later this year. of competition in the coming years, especially
as new liquefaction capacity comes online in
What next? Qatar.
Spot prices in both Asia and Europe remain “I think American projects are now going to
strong enough for buyers to keep purchas- have to review their costs. The new projects will
ing record volumes of US gas. And the price not be able to compete with the Qataris,” the gas
and demand spikes seen during the winter industry participant that spoke to Reuters was
are even prompting certain buyers to start quoted as saying.™

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