US LNG WEEKLY: FOB Gulf Coast cargo values rise as diversions flip directions

US FOB Gulf Coast LNG cargo values rose Jan. 18-25 – the first weekly advance in a month – as bullish market fundamentals strengthened netbacks to end-user markets.

More diversions from Europe to Asia were heard by market participants as demand in the East picked up and slot availability in Europe for prompt cargoes remained limited.

US liquefaction terminals continued to run at or near full dispatch as a seventh major export facility, Venture Global LNG's Calcasieu Pass in Louisiana, prepared to start up and Atlantic and Pacific freight rates declined further.

"For the time being, the only game changer is how heavily will winter hit EU on February," said an Atlantic-based trader.

S&P Global Platts assessed the Gulf Coast Marker for March at $26.60/MMBtu on Jan. 25, up 35 cents/MMBtu from the previous day and a gain of $4.70/MMBtu from the beginning of the week. GCM had fallen each week for the previous four weeks, since hitting an all-time high of $54.95/MMBtu on Dec. 21. Since then, delivered prices in Europe have come down from their highs, but have remained volatile. Northwest Europe delivered LNG's discount to the Dutch TTF gas hub price has come in from its weakest levels.

The LNG shipping market gave mixed signals on the latest trend seen by traders where some ships are being redirected now from Europe to Asia. As there were said to be limited regasification slots available for prompt delivery, some Atlantic-bound ships are reversing course and heading through the Panama Canal in order to deliver cargoes in Asia.

"If Asia pulls away cargo, of course price will go up," said a second Atlantic-based trader. "Discount will be narrower."

A Greek based shipowner estimates that the fundamentals in Asia and the weather in China are behind the recent trade-flow moves.

''Japan storage levels are low, and China is getting colder, also the all-time high imports to Europe mean that we are just running out of capacity here, '' he continued.

Amid word of diversions to Asia, Panama Canal congestion has increased. The maximum wait on Jan. 25 for unreserved LNG tankers transiting the passageway was at nine days northbound toward the Gulf of Mexico and six days southbound toward the Pacific, according to the Panama Canal Authority.

In the US, feedgas deliveries to Calcasieu Pass have picked up as the liquefaction facility prepares to begin production. Once online and fully ramped up, the facility will have a capacity of 10 million mt/year.

In the weeks ahead, Calcasieu Pass will be starting up at a time of significant volatility in supply, demand and prices in the global LNG market.

According to Venture Global, all 18 liquefaction modules have been received at the terminal from Italy and set on foundations. Earlier in January, the operator received US regulatory approval to begin commissioning the first two-train block with feedgas.

Company officials have not addressed whether a cargo will be imported to the terminal for the purposes of cooling down the storage tanks, before the first export from the facility. Cheniere Energy brought in a cool-down cargo before its Sabine Pass terminal, the biggest US liquefaction facility, began exports in 2016.