The resumption of U.S. LNG deliveries to China offers little hope of eliminating the risk of U.S. LNG exports getting shut-in as the coronavirus pandemic chokes off demand in key markets and prices hover at historic lows.

But analysts said the renewal of LNG trade flows that had been frozen for 13 months during the U.S.-China trade war could still help soften the blow of a weak global gas market as China's economy recovers from a period of lockdown amid the pandemic.

"You can't imagine that China's gradual return to normal is enough to counter the two negative drivers on the price side, which are the constrained activity everywhere else and the increase in LNG supply coming from the U.S. and other places," energy analyst Katie Bays, co-founder of research and consulting firm Sandhill Strategy, said in an interview. "China returning to normal just dampens the impact of those."

A BP PLC chartered tanker delivered that first U.S. LNG shipment to China on April 20. The tanker had loaded at the Freeport LNG Development LP facility in March. At least five more tankers carrying U.S. LNG are headed to China, according to online ship-tracking data that showed expected arrivals over the coming weeks.

Four are from Cheniere Energy Inc. facilities in Texas and Louisiana. A fifth is carrying a cargo from Sempra Energy's Cameron LNG in Louisiana. The shipments represent a long-awaited development after the two countries signed a "phase one" trade agreement signed in January, which called for a huge ramp-up in energy purchases by China, including U.S. LNG. Following the initial trade agreement, China said it would grant exemptions to the 25% tariff on LNG that remains in place.

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But economic activity in China was hit hard by the coronavirus, which, combined with a warmer-than-expected winter there, led to a sharp decline in the country's demand for gas. Now Chinese economic activity is beginning to return to normal, and gas demand is recovering.

"It only makes sense that two of the largest global LNG players should work together to ensure reliable supply," Charlie Riedl, executive director of the trade group Center for Liquefied Natural Gas, said in an email. "We see China's emergence from the impacts of COVID-19 as a positive sign for natural gas demand returning, given China's large market. The recent group of U.S. LNG cargoes headed towards China is a good sign for energy trade and the industry."

The question of how much volume China can absorb could prove an important one at a time of tremendous supply and demand uncertainty in the global gas market.

China imported more than 6.9 million tonnes of natural gas including LNG in March, down about 0.2% year over year but more than previously expected, according to S&P Global Platts, citing data from General Administration of Customs released April 14 and Chinese market sources. Some Chinese gas demand is driven by export industries, and demand in export markets could be constrained for months and limit the upside.

The bounce-back of the world's fastest-growing LNG buyer should benefit all Chinese suppliers, but the politics of the trade war could benefit U.S. exporters, Bays said.

"U.S. LNG probably outperforms competitors in China right now, because the country is way behind on complying with the phase one agreement," Bays said. "They need to pick up some slack, and you get a lot of bang for your buck with energy purchases."

Still, China's demand is unlikely to be enough to significantly alter the bleak outlook for global gas markets. Market observers have warned that already high European storage levels could fill up around the start of the third quarter, potentially triggering a wave of cargo cancellations in the U.S. if other markets cannot absorb the LNG.

"China isn't enough by itself to fundamentally change the fortunes of the global market, even though it's a big buyer," Bays said. "If we are going to continue to drift into a more compressed demand scenario, and storage continues to fill up, and that dynamic continues to get worse, then you will see curtailments in the U.S."

The price returns for selling a spot U.S. LNG cargo to a buyer in Europe or Asia are expected to remain negative through the end of the year, S&P Global Platts Analytics said in a recent outlook.

Feedgas deliveries to U.S. LNG terminals have shown little evidence of the turmoil in global gas markets. Dips in recent weeks were associated with other factors, such as maintenance work on a pipeline feeding Cheniere's Sabine Pass LNG terminal in Louisiana and at the Freeport LNG facility in Texas.

Monthly LNG exports began to decline in February but only modestly — to 68 from 79 the previous month, according to the most recent figures from the U.S. Department of Energy, released April 16. About 65% of the cargoes that departed from the U.S. in February for the Europe and Central Asia region, which includes Turkey, according to an S&P Global Market Intelligence analysis of the DOE data. Some of the top export countries included the U.K., France and Spain, which have all entered lockdowns because of the pandemic.

Europe has served as a key outlet in absorbing the flood of new LNG supplies. But recent shipping cost data show greater losses delivering a spot cargo of U.S. LNG to Europe than to Asia, Jefferson Clarke, managing director for LNG at shipbroker Poten & Partners Inc, said during an April 20 webinar.

"Do we see China increasing its imports from the U.S.? That is hard to tell. It's really more of a political question than an economic question, because there are plenty of other cargoes available across the globe," Clarke said. "It can, and I'm sure it will. But that is not something we can forecast specifically. What we forecast really is U.S. into the Asian markets."

S&P Global Platts and S&P Global Market Intelligence are owned by S&P Global Inc.