The global market for U.S. natural gas is collapsing

At least 20 cargoes 

of U.S. liquefied 

natural gas (LNG) 

have been cancelled 

by buyers in Asia 

and Europe, 

according 

to Reuters. 

Cheniere Energy, 

one of the main exporters 

of U.S. LNG, has seen 

an estimated 10 cargoes 

cancelled by buyers 

halfway around 

the world, 

Reuters said.

The price for LNG 

in Asia was crashing 

before the pandemic, 

because of a substantial 

increase in supply last year. 

LNG prices in fall 2018 

were at around $12/MMBtu.

In October 2019, LNG prices 

in Asia traded near $7/MMBtu.

Prices for LNG in Asia 

for June delivery have 

recently traded at $2/MMBtu, 

only slightly higher than 

Henry Hub prices in the U.S. 

With the cost of liquefaction 

and transportation, 

gas break even prices 

for delivering to Asia 

are around $5.56/MMBtu, 

according to Reuters. 

But prices are trading 

at less than half of that level.

“The financial prospects 

for [LNG], once 

one of the globe’s 

hottest energy 

commodities 

– seem to 

be imploding 

before our eyes,” 

Clark Williams-Derry wrote 

in a new report for the 

Institute for Energy 

Economics and Financial 

Analysis (IEEFA). 

The oil majors 

have made 

large bets on LNG 

in recent years. 

Royal Dutch Shell 

spent more than 

$50 billion to buy 

BG Group in 2015. 

The deal remade Shell 

into one of the largest 

traders of LNG.

Several other oil majors

 – Total SA, ExxonMobil 

and Chevron – have also 

made massive bets on LNG.

LNG prices were already 

deflating before COVID-19.

But industry analysts are

predicting a huge shortfall 

in gas production in the 

Permian will boost prices 

by next year. 

For now the economics 

for LNG are dismal.