Natural gas oversupply persists in the United States as the coronavirus pandemic depresses demand for LNG. Export and domestic prices hover just above historic lows this week as demand keeps lagging behind the production.
Export LNG prices inched up by 30 cents from a record low in late March to $1.60/MMBtu FOB USGC on Wednesday. Northeast Asia benchmark JKM prices stood at $2.40/MMBtu, just above record lows.
Prices in US Henry Hub hovered near $1.80/MMBtu on Wednesday, after tumbling to a 21-year low at $1.45/MMBtu on April 3.
With persistently weak demand and low import prices in Europe and Asia, market participants expect US gas production to fall by between 3 Bcfd and 15 Bcfd in April through June. This expected output reduction supported forward prices at the Henry Hub, Dominion South, and Waha Hub to their annual highs recently.
Chinese importers have begun purchasing US LNG again after being granted import tariff exemptions. Tanker tracking data showed at least five carriers of US LNG heading towards China. The nationwide lockdown in India and other South Asian countries dragged the region's LNG demand to near 12-month lows.
US gas production has averaged 92 Bcfd so far in April, down by 200 MMcfd from March. Market participants said it was a signal of further decline ahead. Industrial customers averaged 22.5 Bcfd over the last two weeks, down 500 MMcfd year-on-year.
EIA data showed that US natural gas storage fell to 1.986 Tcf for the week ended March 27, 292 Bcf higher than the five-year average. Gas demand for LNG production keeps growing, but utilization rates at US trains are expected to fall in the coming months due to slowdown in global demand growth.
