From an Article by Nick Cunningham, The Fuse, February 10, 2020

LNG market down in mainland China

In 2019, a wave of new LNG export terminals came online, adding a large dose of fresh supply that dragged down prices. In a broad sense, global demand is still on the rise, particularly in China, but even before the coronavirus analysts had predicted that the world would need several years to digest the supply increase from last year.

But the outbreak of the coronavirus and Beijing’s efforts to stop the spread of infections resulted in tens of millions of people quarantined. The government idled factories, as did multinational companies operating in the country. Thousands of flights have been cancelled.

Needless to say, bringing much of the world’s second largest economy to a partial halt has global ramifications. But disruptions to global supply chains happen very quickly. China’s CNOOC declared force majeure on LNG purchases in an effort to slow imports. Shell and Total rejected those declarations, setting the stage for legal battles. “As many as 35 February cargoes could be subject to force majeure declarations with at least five already diverted as of Feb. 7,” ship broker Poten & Partner estimated in a report, according to S&P Global Platts.

Prices for LNG in Asia—the so-called Platts JKM marker—fell below $3/MMBtu in recent days, a historic low. The steep drop in Chinese demand has dragged down an already oversupplied market.

http://energyfuse.org/coronavirus-and-the-global-lng-glut/

Jeremiah Shelor, Natural Gas Intelligence, February 3, 2020

Over the weekend, the celebrated groundhog Punxsutawney Phil foreshadowed an early spring, but natural gas traders have spent the past month wondering when winter will start, much less when it will end.

To describe January heating demand as underwhelming would qualify as an understatement, and any lingering winter risk premiums seemed to evaporate with the morning dew in February bidweek trading; deep discounts from coast to coast dropped NGI’s February Bidweek National Avg. 75.5 cents to $1.810/MMBtu.

If peak-winter prices shy of $2 seem low, that’s because they are, according to historical comparisons. The February 2020 average is down $1.425 from February 2019’s average of $3.235, which was itself down 99.5 cents from the $4.230 February 2018 bidweek average.

The near-complete absence of January cold — especially for key demand markets in the Midwest and East — sent natural gas futures plunging below the psychologically and technically significant $2 level.

The February Nymex contract rolled off the board at $1.877 last week; the 28.5-cent month/month decline at benchmark Henry Hub established a bearish baseline that saw fixed-plus-basis averages drop at least a quarter at nearly every trading location in NGI’s bidweek reporting.

The Northeast posted the largest discounts during February bidweek. New England hubs hardly showed any of their characteristic winter volatility in spot trading during the month of January, and February fixed-plus-basis averages plummeted accordingly.

Algonquin Citygate tumbled $3.315 month/month to average $3.135, while Iroquois Zone 2 shed $3.265 to $3.205.

Midwest hubs saw less pronounced but still hefty discounts. Chicago Citygate dropped 40.0 cents to average just $1.895.

The lack of premiums farther downstream unsurprisingly meant discounts for Appalachia as well. Columbia Gas fell 28.5 cents to $1.530, while Texas Eastern M-3, Delivery dropped $1.145 to $2.195.

With the market entering the first trading week of February, the path forward for natural gas prices remains clouded in uncertainty. Forecasts heading into Monday’s trading suggested bulls could only hope for near-normal temperatures at best through mid-February