US LNG export utilization rises heading into July as end of seasonal maintenance nears

Total US LNG feedgas demand on June 28 hit the highest level in four weeks, as utilization at US export terminals continued to rebound from maintenance-driven lows and help strengthen the near-term outlook for US gas demand.

Feedgas flows were on track to reach about 12.7 Bcf/d on June 28, based on nominations for the morning cycle, S&P Global Commodity Insights data showed. That was up more than 1 Bcf/d from June 27 and followed a recent low of about 10.8 Bcf/d on June 22.

The uptick in flows comes as US gas market analysts are watching for a return of feedgas demand as one factor that could help tighten US supply-demand fundamentals headed into July. Strong netback margins are likely to continue encouraging US gas exports to climb back toward full capacity, even with high gas storage levels in Europe and weak demand in Northeast Asia weighing on LNG prices.

The rebound in US feedgas demand has been driven by deliveries to Cheniere's Sabine Pass in Louisiana -- the country's biggest US LNG export terminal -- as the facility appeared to be nearing the end of major maintenance activities planned as part of a six-year maintenance cycle. Flows to Sabine Pass began increasing late last week and have continued to pick up. The facility was scheduled to receive nearly 4.3 Bcf/d on June 28, an increase of about 2 Bcf/d from June 23.

Cheniere confirmed June 28 that maintenance activities remained underway at Sabine Pass but declined to comment further about its maintenance plans, including the expected duration of the activities.

"We look forward to resuming operations safely as soon as these planned activities are completed," Cheniere spokesperson Bernardo Fallas said.

However, market analysts anticipated that Cheniere would finish the maintenance work imminently. Sabine Pass has six liquefaction trains, each with an LNG production capacity of about 5 million mt/year. The major maintenance has focused on two of the trains.

US price momentum

Analysts at Goldman Sachs said in a June 26 research note that they expected the return of Sabine Pass liquefaction units from maintenance "in the coming days" to drive about a 2 Bcf/d increase in gas demand for exports. The analysts cited most historical maintenance events at Sabine Pass lasting between 20-30 days, a similar duration to the current work.

The recent uptick in feedgas volumes at Sabine Pass has undoubtedly added to the recent upward momentum for gas futures prices.

Over the past two trading weeks, the soon-to-be-prompt NYMEX August gas futures contract has gained roughly 40 cents, propelled in part by hotter weather and strong power burn demand across Texas and more recently the US Southeast. In June 28 trading, August futures were down just 5-6 cents on the day to trade around $2.73/MMBtu, data from the Intercontinental Exchange showed.

Meanwhile, the Platts Gulf Coast Marker for US FOB cargo loading 30-60 days forward was assessed June 28 at $8.33/MMBtu, down 32 cents on the day.

Spring maintenance

Spring maintenance at US LNG facilities tending to be clustered around May and June, and traders and market analysts are anticipating a significant rebound headed into July.

US LNG feedgas deliveries in June have averaged about 11.4 Bcf/d as of June 28, down from about 13 Bcf/d in May, when smaller maintenance disruptions were likely to blame for lower feedgas demand. In April, before the terminal maintenance season started, flows averaged nearly 14 Bcf/d, S&P Global data shows.

US LNG feedgas demand is expected to average 13.2 Bcf/d this summer, up around 2 Bcf/d from the previous summer, with the Freeport LNG terminal in Texas fully back online after an extended outage that ended in February and production at Calcasieu Pass LNG ramping up in the year since the Louisiana facility came online, according to S&P Global analysts.