LNG exports declined this summer amid low demand for natural gas

U.S. exports of liquefied natural gas (LNG) fell to an average of 3.1 billion cubic feet per day in July after reaching a record high of 8 billion cubic feet per day in January, according to the U.S. Energy Information Administration (EIA).

The exports in July were similar to those in May 2018, when the available liquefaction capacity was about one-third of the existing capacity. In the week of July 12-18, LNG exports were loaded by four vessels for a total of 2 billion cubic feet per day — the same levels as the second week of December 2016.

U.S. LNG exports are expected to remain low for the next few months, according to the EIA. Recent trade press reports show 45 cargoes have been canceled for August, and about 30 cargoes have been canceled for September shipments.

Globally, natural gas demand has fallen as a result of efforts to mitigate the spread of COVID-19. And, high natural gas storage inventories in Europe and Asia and an ongoing expansion of global LNG liquefaction capacity have contributed to international natural gas and LNG prices to decline to record lows. Most U.S. LNG exports are traded in the global spot market, and low global spot and forward prices for natural gas and LNG have made exports from the United States uneconomical.

About 46 LNG cargoes were canceled in June, and about 50 of the cargoes were canceled in July, according to the EIA. This exceeded the expected number of cancelations for both months. The most affected LNG terminals were Sabine Pass in Louisiana and Corpus Christi and Freeport in Texas, and liquefaction capacity use at those locations in July was an average of 33%, 28% and 6%, respectively.

Since U.S. LNG export capacity ramped in 2018, capacity use in the summer had been an average of more than 90% because of more weather-related LNG demand in the northern hemisphere, which consumes 98% of global LNG. This summer, capacity use at U.S. LNG liquefaction facilities is projected to be an average of 35%, and this is similar to the use in off-peak months (April, May, September and October) when seasonal demand is typically at its lowest level.

Global LNG consumption rose to record levels in 2018 and 2019, and it continued to rise through February. LNG imports in Asia, which account for 70% of global LNG imports, fell to 2019 levels by June, largely as a result of declines in Japan and South Korea. LNG imports in Europe also fell because of lower natural gas demand and high levels of natural gas in storage following a mild winter. Natural gas storage levels in Europe were at 85% capacity at the end of July. LNG imports in Europe are expected to be limited in the coming months amid low demand.

Global LNG suppliers have decreased shipments in response to low demand. In June and July, Australia and the United States, the second- and third-largest LNG exporting countries, decreased LNG exports the most among LNG producers and cut shipments by an average of 1.2 billion cubic feet per day and 1.5 billion cubic feet per day, respectively. Russia is the fourth-largest LNG exporter and reduced LNG shipments by 25%, or an average of 0.9 billion cubic feet per day, in June and July, from the same period in 2019. Qatar, the largest LNG exporter, cut LNG exports by 0.5 billion cubic feet per day in June and July, while its LNG exports were flat in other months this year.

U.S. LNG exports are expected to return to pre-COVID levels by November and remain at about 8 billion cubic feet per day to 9 billion cubic feet per day through the winter and into 2021.