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U.S.-to-U.K. LNG Shipment May Mark New Trade Link, JPMorgan Says

A delivery of liquefied natural gas to the U.K. from the U.S. last week was the first such consignment since 1959 and may mark the start of a new trade link between the markets, JPMorgan Cazenove said.

The LNG tanker Maersk Meridian delivered an initial shipment of the fuel to the Isle of Grain terminal, east of London, from the Sabine Pass terminal in the U.S., National Grid Plc said Nov. 19. The fuel had been reloaded at the U.S. terminal, JPMorgan Cazenove analyst Fred Lucas said in a report dated yesterday.

“Cargo reloading will create a physical link, albeit presently very thin, between the U.K. and U.S. gas markets,” which were previously “isolated,” he said. “If reloading volumes rise materially, this could enforce a tighter price spread between the U.K. and U.S. gas markets.”

LNG was last shipped to the U.K. from the U.S. on Feb. 20, 1959, when a tanker delivered fuel to Canvey Island from Lake Charles, Louisiana, Lucas said. That was also the first-ever LNG cargo, according to JPMorgan Cazenove. LNG is natural gas that’s chilled into liquid form, shrinking in volume to 1/600th of its gaseous state.

“We suspect that LNG exporters (especially the Qataris) are watching this trade very closely,” Lucas said. “They will not want to sell LNG on Henry Hub pricing only to see their gas re-exported to higher-price markets by terminal owners,” he said, referring to the benchmark for prices of natural-gas futures traded in New York.

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