Only 40% Price Crash Next Month Can Shut U.S. LNG

This article first appeared on the BNEF mobile app and the Bloomberg Terminal.

  • Shut-in would require October JKM below $3.94 by July 20
  • TTF prices for September would need to be below EUR10.19/MWh

Price-driven U.S. LNG shut-ins are unlikely this summer because of an absence of the necessary forward price signals, according to BloombergNEF. Negative spot or front-month export arbitrages are past the point at which they can influence the decision whether or not to lift a cargo because of shipping logistics and the cancellation notice periods in U.S. LNG export contracts.

Three-month forward prices do matter, and if the three-month forward profit margin for U.S. LNG exports goes significantly negative, export cargoes should get canceled. However, the market is almost out of time for these prices to move low enough quickly enough to influence overall U.S. LNG supply this summer.

Bloomberg solutions for Liquefied Natural Gas Visit the portal.

An overall U.S. supply reduction is unlikely in the coming months unless JKM, the Asian LNG benchmark futures contract, for October delivery trades consistently and significantly below $3.94 before July 20. This situation could cause a September lifting from Sabine Pass (with October delivery to North Asia) to be canceled. This scenario would also require TTF prices for September to be trading consistently below 10.19 euros/MWh. As of June 25, JKM October was trading at $5.47/MMBtu and TTF September was trading at 11.50 euros/MWh, 39% and 13% above these thresholds, respectively.

Clients can access the full report on The Terminal or on web

BNEF Shorts are research excerpts available only on the BNEF mobile app and the Bloomberg Terminal, highlighting key findings from our reports. If you would like to learn more about our services, please contact us.

About BloombergNEF

BloombergNEF (BNEF) is a strategic research provider covering global commodity markets and the disruptive technologies driving the transition to a low-carbon economy. Our expert coverage assesses pathways for the power, transport, industry, buildings and agriculture sectors to adapt to the energy transition. We help commodity trading, corporate strategy, finance and policy professionals navigate change and generate opportunities.
Sign up for our free monthly newsletter →

Want to learn how we help our clients put it all together? Contact us