China energy giants return to Asia as sellers
LONDON/SINGAPORE: Falling industrial demand and mild weather have turned China’s energy giants into sellers of liquefied natural gas (LNG) in Asia for the first time since last year’s massive import spree.
Chinese players were on the receiving end of last year’s doubling of LNG prices, largely driven by their rapid shift to gas to combat coal smog as well as elevated regional demand for the fuel.
Although a CNOOC executive last week warned producers not to expect a similar payday this year , industry executives said they were not unduly concerned by the blip, saying Chinese demand would continue to grow.
However, some traders were caught off guard by the speed of the demand downturn in the runup to and aftermath of China’s Lunar New Year holidays last month, with three cargoes now on offer.
LNG producer profits soared in tandem with spot prices hitting three-year highs above US$11 (RM43.04)per mmBtu as China’s buying spree peaked in December and January.
But a slump set in as milder weather settled over Japan and other major gas consumers in the region and expectations that Chinese buyers returning from the Lunar New Year break would take up the slack fell through.
Plunging demand turned national oil companies (NOCs) like CNOOC, Sinopec and PetroChina into sellers and they are now offering cargoes for late March and April delivery, trade sources said. Meanwhile, spot LNG prices have sunk to the mid US$8 per mmBtu range.
“The heating season is almost over and some buyers are getting more balanced, including small buyers so yes, Chinese companies have cargoes for offer,” a source at one said.