Weak US LNG deliveries could weigh on European sendout

Maintenance at the 33mn t/yr Sabine Pass LNG export terminal throughout this month has led to a drop in US loadings and coupled with an open inter-basin arbitrage that has also pulled supply away from Europe could mean early-July LNG sendout at Europe's regasification terminals will slow.

The journey from US LNG export terminals on the Gulf coast to Europe takes around two weeks, and given that US LNG departures to Europe so far this month are on track to be the lowest for any month since October 2021, this could mean deliveries to Europe in the first half of July and thereby European LNG sendout will fall well below levels reached in recent months.

Around 36 vessels have left the US and declared for Europe since the start of this month, down from 70 a month earlier, according to ship tracking data from oil analytics firm Vortexa, with just under 70pc destined for ports in northwest Europe and the UK.

Deliveries from the US made up 43pc of all European imports in 2022, and around 40pc of receipts so far this year, according to Vortexa. Consequently, any reduction in deliveries from the US to Europe could disproportionately reduce supply to the region — even at times of lower seasonal gas demand in northwest Europe.

US deliveries to Europe have fallen since the start of June because of planned maintenance at the Sabine Pass terminal. The works have left the terminal operating at half its capacity since the start of the month, judging by feedgas levels to the terminal, although it has started to ramp up again over the weekend.

Only 10 cargoes have departed from the terminal to Europe so far this month, down from around 27 in May and 32 in April, according to Vortexa. Flows from Sabine Pass made up around 40pc of US deliveries to Europe in the past year, followed by the 17mn t/yr Corpus Christi terminal accounting for around 20pc, from which departures to Europe have also dropped in June. Compressor maintenance on the pipeline feeding the Corpus Christi facility in mid-to-late May weighed on feedgas supply and is likely to have curbed loadings. And the temporary reopening of the inter-basin arbitrage earlier this month may have prompted a larger share of Corpus Christi offtakers to ship cargoes to Asia ahead of Europe. Around 40pc of US production has been shipped or already delivered to Asia so far this month, up from around 20pc of output in February-May. Lower deliveries from Corpus Christi will therefore affect Europe's early-July sendout potential.

Low Yamal exports and open NSR could further weaken Europe's receipts

LNG exports from Russia's 17.44mn t/yr Yamal terminal at the port of Sabetta have also declined so far in June, with the facility exporting just over 1mn t so far this month, on track to fall below the 1.7mn t a year earlier.

Supply dropped as one train at the project was shut down for maintenance at the start of this month and only returned to operations earlier this week, according to market participants. The reopening of the Northern Sea Route (NSR) at the start of June could also mean that more supply is shipped directly to Asia in the coming weeks, given the shorter journey for vessels and the northeast Asian delivered market holding at a much more competitive level compared with European des prices than in previous months.

Slow LNG deliveries could boost Europe's LNG storage drawdown

A drop in deliveries, coupled with an increase in European gas demand could encourage firms to draw down LNG inventories, temporarily increasing the scope for strong sendout even if imports slow.

This has happened in Spain where inventories fell to 50pc of capacity as of Sunday morning, around the three-month low reached at the beginning of last week.

The UK's LNG sendout and imports have already tumbled this month, but firms have so far preserved their LNG stocks. Tanks at the largest terminal South Hook were just under 85pc full as of Monday morning, while Isle of Grain was nearly three-quarters full and Dragon tanks were at 67pc of capacity.

But French LNG stocks have been drawn down to just under 51pc of capacity as of Sunday morning, despite sendout falling in June so far, leaving less room to draw on stocks if deliveries slow further.

The scope for slower European imports of US LNG adds to slower pipeline deliveries from Norway to the continent, with an extended shutdown at Shell's 79.8mn m³/d Nyhamna gas processing plant until 15 July, although works could continue beyond the date, according to Norwegian offshore system operator Gassco.

By Florence Schmit and Ellie Holbrook