Tsvetana Paraskova Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More Info Share Facebook Twitter Google + Linkedin Reddit Premium Content Iran: A Geopolitical Time Bomb A Worrying Sign For Global Oil Demand The 100-Year Old Wildcatter Poised For A Breakout The Last U.S. Oil Major In Venezuela China Determined To Avoid Another Natural Gas Crisis By Tsvetana Paraskova – Dec 12, 2018, 9:00 AM CST Join Our Community Last winter, China gobbled up spot cargoes to meet soaring natural gas demand in freezing temperatures, upending the liquefied natural gas (LNG) market, which was thought to be on the verge of oversupply just a year ago.
The Chinese coal-to-gas switch policy for millions of households backfired with severe gas shortages last winter, lifting domestic Chinese LNG prices to more than US$20/mmBtu and driving Asian spot LNG prices up. This winter, China’s authorities are determined to avoid another natural gas supply crunch. And they are handling supplies much better than past winter—domestic natural gas production is rising, state energy giants are boosting gas pipeline infrastructure and connectivity, and the coal-to-gas switch is more measured and moderate, taking into account expectations of demand. Chinese natural gas imports are soaring, but procurement for this winter’s demand started early to avoid a last-minute rush and a
China’s natural gas storage tanks are close to full. The element of surprise that pushed LNG prices soaring last winter has been eliminated. This year, weather is also in favor of Chinese authorities. Milder weather a month into the heating season and forecasts for a milder-than-usual winter have led to expectations that China won’t see another supply crunch between December and February. As a result, spot LNG prices in Asia fell last week to their lowest level in six months, with spot prices for January delivery down US$1 in one week to US$8.80/mmBtu—the lowest price since May this year and down from last year for the first time in 2018. That’s because demand is softer, storage is nearly full, and buyers from China to South Korea to Japan had moved in as early as in September and October to procure LNG cargoes to avoid last year’s rush and surging market prices. A drop in spot LNG prices in Asia is not typical for the winter season in the northern hemisphere. Related: Citi: Oil Prices Are Going Nowhere Next Year Prices and natural gas demand soared last winter as China was scrambling to procure supplies in a colder-than-usual season. The authorities had to backtrack on the coal ban in some areas to ease the crunch. This year, milder weather has surely helped, but China started to carefully plan supply, as soon as last winter’s season ended