Sign Up for FREE Daily Energy News
Canadian Flag CDN NEWS  |  US Flag US NEWS  | TIMELY. FOCUSED. RELEVANT. FREE
  • Stay Connected
  • linkedin
  • twitter
  • facebook
  • youtube2
BREAKING NEWS:

Copper Tip Energy Services
Vista Projects
Vista Projects
Copper Tip Energy


China Seen Skipping Winter LNG Feast With Storage Brimming


These translations are done via Google Translate

By Bloomberg News

(Bloomberg) Don’t expect an LNG buying binge ahead of winter from the world’s fastest growing consumer of the fuel.China will likely pull back on spot purchases of liquefied natural gas before the peak demand season as a flurry of earlier bargain buying nearly maxed out storage space. Meanwhile, seaborne and pipeline deliveries deferred during the worst of the Covid-19 pandemic are expected to finally arrive, further weakening its appetite for supplies from the open market.

“There is a big question about whether demand will recover enough in September and October to digest the almost-full gas storage while pipeline imports resume,” said Miaoru Huang, a Beijing-based analyst with Wood Mackenzie Ltd. “There will be no room for more injections to underground storage by early September.”

Past the Peak

Some of China’s biggest buyers have lowered spot purchasing since July as they struggle with higher inventories, according to traders at the state companies and their counterparties, who asked not to be identified as the information isn’t public. PetroChina Co., Sinopec and China National Offshore Oil Corp. have already largely finished buying for the winter, they said. The three companies didn’t respond to requests for comment.

It’s been a roller-coaster year for natural gas into China, the world’s biggest buyer when measuring combined LNG and pipeline imports. State firms declared force majeure on some purchases from February as coronavirus lockdowns smothered demand. Later, as China was among the first countries to emerge from the pandemic, its economic rebound coincided with a crash in LNG prices to record lows. It then feasted on the cheap fuel, boosting imports by 20% year-on-year in the second quarter, compared with just 2.9% in the first.

Filling Faster

That resulted in the nation filling storage tanks faster than usual. China started gas injection into underground sites in March when demand was weak, one month earlier than normal, according to consultancy JLC Network Technology Co. Meanwhile, the jump in spot purchases earlier has left LNG tanks at coastal terminals at high levels.

ROO.AI Oil and Gas Field Service Software
GLJ
Entelec Conference and Expo 2024

“Spot LNG prices were attractive to Chinese importers, which led to higher injections,” said Sun Xuelian, an analyst at JLC. “The additional amount went underground as consumption growth flattened amid the pandemic.”

High inventories are already curbing China’s import growth. The nation received a little over 5 million tons of the fuel in July, the lowest level since March when the economy was largely shut due to Covid-19, according to the Customs General Administration.

Even as China’s storage capacity has risen in recent years, as a share of consumption it still trails more mature markets like the U.S. and Europe. Total capacity is about 6% of annual demand, according to Wood Mackenzie. Germany and Italy, both also highly dependent on imports, have capacity amounting to 25% and 33% of demand, respectively, according to the International Energy Agency.

Also limiting spot purchases is a slug of gas from long-term pipeline and LNG suppliers that was deferred during the peak of the pandemic. Those shipments will come due in the winter, further weakening China’s appetite for more spot cargoes, said Liu Yue, an analyst with SIA Energy. That may add urgency to sell into the downstream market and undercut the typical winter price hike in China.

“Chinese importers, which are usually under pressure to meet the surge of winter demand, now may face pressure to sell in order to ease stockpiles,” Liu said.



Share This:



More News Articles


GET ENERGYNOW’S DAILY EMAIL FOR FREE