It’s been a difficult year for U.S. LNG exporters: we’ve repeatedly said this past summer was the Summer from Hell. Will conditions improve next year, or will we see a repeat of this summer, with dozens upon dozens of cargo cancellations?

To look to next summer, let’s consider the 2020/2021 winter. Europe and Northeast Asia are the two most important destinations for U.S. LNG. Two factors this winter will likely determine U.S. LNG’s conditions next summer: European storage levels, and Northeast Asia’s ability to contain COVID-19 cases from surging. The initial signs out of Europe are not encouraging for U.S. LNG: COVID cases are soaring, while the continent could receive a glut of gas from new pipelines from Russia and Azerbaijan. It remains to be seen if Europe will experience another record-hot winter, which would constrain natural gas demand. Northeast Asia is fighting back another wave of infections, for now. Development, production, and distribution of a COVID vaccine will be a major unknown. While LNG winter netbacks will likely remain “in the money,” supporting U.S. exporters, next summer could be another difficult one. We think next summer will see improving conditions, but significant cancellations are still possible.

U.S. LNG exports today – and next summer

According to the most recent EIA data, about 80% of all U.S. LNG exports go to Europe or NE Asia. Europe’s share of exports has surged over time, as European offtakers started to receive shipments from new trains coming online in Sabine Pass, Corpus Christi, Cameron, and Freeport. Just as importantly, the U.S. – China trade war capped LNG exports and resulted in flows shifting from Asia to Europe. While the Indo-Pacific will likely contribute the lion’s share of future, incremental LNG exports, Europe is the most important market for U.S. LNG today.