Factbox: US producers throttle back as gas faces domestic, global headwinds


US producers reduced natural gas production over the last week as continued volatility in the oil markets keeps many operating below wellhead breakeven prices.

Month to date, US gas production is down 2.3 Bcf/d from April to an average of 89.4 Bcf/d. Reduced supply and stronger weather-driven demand lifted prompt futures at the benchmark Henry Hub Wednesday to their highest settlement price in nearly fourth months at $2.13/MMBtu.

On the global market, supply loaded at US LNG terminals continues to face headwinds as near-parity gas prices around $2/MMBtu in Europe and Asia keep cargo netbacks in negative territory.

During its first-quarter earnings call, executives at Cheniere said they had already begun contingency planning as they entertain the possibility that some liquefaction trains in Louisiana and Texas could go underutilized in the months ahead.

“As Japan, the world’s largest LNG buyer, moves to extend its lockdown through the end of May, US LNG cargoes look increasingly at risk,” said Ross Wyeno, lead analyst, Americas LNG, S&P Global Platts Analytics.

PRICES
**The NYMEX Henry Hub prompt-month contract surged over 14 cents Wednesday, settling at $2.134/MMBtu, the benchmark index’s highest since mid-January.

**Balance 2020 forward prices at Henry Hub marked a fresh annual high Tuesday at $2.43/MMBtu as falling production drives an increasingly bullish outlook for Q4.

**Henry Hub spot gas was moving toward a settlement around $1.88/MMBtu Wednesday, down from a seven-week high Tuesday at over $1.95/MMBtu.

**Global benchmarks in Europe and Asia continue to trade at discounts to the Henry Hub, with the Dutch TTF and Platts JKM settling Wednesday at $1.83/MMBtu and $2.03/MMBtu, respectively.

**Waha spot gas prices were moving toward a settlement around $1.77/MMBtu Wednesday, down from a six-month high Tuesday at $1.80/MMBtu.

**Waha forward prices for January 2021 settled at their highest in over three years Monday, approaching $3/MMBtu, as falling West Texas production boosts the outlook for winter.

TRADE FLOWS
LNG

**France’s Total plans to cancel some US LNG cargoes this summer, given weak prices and demand due to the global economic slowdown, the CEO said.

**Cheniere, the biggest US LNG exporter, has received additional cancellations beyond two for April that were previously disclosed, the CEO said without providing details.

**Atlantic market participants are said to be looking to import more LNG into the US due to low international versus domestic gas prices, traders told Platts.

**Traders are watching for portfolio players trying to move Caribbean, or even West Africa volumes, into the US Mid-Atlantic and Northeast.

**cFlow, Platts trade-flow software, shows the Catalunya Sprit left Trinidad and Tobago laden on April 30 — likely headed to the Everett LNG terminal near Boston as of Wednesday.

Onshore gas

**US gas production is down 2.5% month to date from an average 91.7 Bcf/d in April as oil-directed drilling slows in key basins including the Permian, the Bakken and SCOOP/STACK.

**Permian gas production is averaging 10.9 Bcf/d in May, down from a monthly record high at 12.2 Bcf/d in December.

**Gas-fired power burn is averaging 25 Bcf/d month to date, down from early-May levels around 26.5 Bcf/d last year, despite significant generation-stack changes and low prices.

**US industrial gas demand continues to weaken in early May, falling to an average 20.1 Bcf/d as chemical facilities and refiners dial back consumption amid lower product demand.

**US LNG feedgas volumes are averaging 7.7 Bcf/d in May, down from 8.3 Bcf/d in April as global portfolio players opt increasingly to defer or cancel cargo liftings.

**US gas in storage climbed to 2.21 Tcf in the week ended April 24, following a 70 Bcf injection that was more than triple the five-year average, data from the US Energy Information Administration shows.

INFRASTRUCTURE
**The US oil and gas rig count fell to 432 during the week ending April 29, its lowest on record dating back to 2005, data from Enverus Drilling Info showed.

**Permian rig count tumbled to 229 last week, its lowest since October 2016.

**Cheniere has raised the possibility that a final decision on whether to build its proposed midscale liquefaction expansion at its Texas terminal may be put off until 2021.

**LNG Ltd. has appointed voluntary administrators, signaling that the Magnolia LNG developer may be preparing to enter bankruptcy or liquidation.

**Total does not expect to expand its North American LNG business beyond current commitments anytime soon. The CEO has expressed doubts over the near-term fate of the Driftwood LNG project in Louisiana.

**Sempra has delayed until next year an FID on Port Arthur LNG in Texas amid weak market conditions. The company expects FID on the Energia Costa Azul project in Mexico during Q2.

**Cove Point customers continued to nominate gas volumes that are at the facility’s design capacity, suggesting utilization will remain robust for now, Dominion said.

**NextDecade has extended to May 2021 the outside effective date for commencing its lease for the 984-acre site in South Texas where its proposed Rio Grande LNG terminal is to be built, amid uncertainty over FID timing.
Source: Platts





Source link