Cheniere Energy Inc is signaling it may reduce output amid weak demand. The company has tendered to purchase six cargoes to be shipped to Europe later this year. According to traders, this rare move can indicate that Cheniere is gauging the magnitude of the current glut as it mulls production reduction.
It may also mean that Cheniere is looking for shipments for its buyers because it is more profitable than producing and delivering its own LNG from its facilities in Sabine Pass, Louisiana, or Corpus Christi. Traders are closely monitoring any possibilities of output cuts from US LNG exporters amid the COVID-19 pandemic, which depresses demand and worsens an oversupply.
Shipping LNG from the US to Europe or Asia will likely be unprofitable this summer due to declining spot prices and rising freight rates. As a result, purchasing available cargoes in the market will be cheaper than producing and shipping them from US LNG terminals.
