China is back on the spot in the Liquefied natural gas (LNG) market to seek cargoes for the coming winter, potentially upsetting a fragile balance in the global natural gas market.
In recent months, China has signed many long-term LNG supply deals, including with the top exporters, the United States and Qatar. But China is also back on the spot market with a massive tender for cargoes to be delivered later this year and throughout 2024, Oilprice.com reports. This is just as Europe has reached its gas storage target well ahead of the November 1 deadline.
After a record slump in Chinese gas demand and LNG imports last year prompted by COVID-related lockdowns, China’s gas consumption has risen so far this year compared to 2022, although it’s still below the growth seen up to 2021.
Intensified competition from China and other Asian buyers could leave Europe in an even more vulnerable position regarding supply for the 2023/2024 winter by driving prices higher and attracting more LNG cargoes to Asia than EU buyers would have liked.
China’s state-owned energy giant Sinopec, via its trading arm Unipec, has recently issued a tender seeking to buy as many as 25 LNG cargoes between October 2023 and December 2024, trading sources familiar with the plans told Reuters this week.
The report added that Sinopec is looking for offers to buy one LNG cargo for delivery in October, five cargoes for November, and seven for December 2023. The rest of the 25 cargoes will be delivered one each month in 2024. It may have plans to resell all or some of those cargoes later and not use them for China’s domestic gas consumption. Whatever the case may be, that’s the biggest tender by a state-held Chinese buyer to seek LNG cargoes on the spot market since February this year, Bloomberg notes.
Lockdowns and slower economic growth led last year to the first annual drop in China’s gas consumption since 1990, while China’s LNG imports slumped by 20%, mainly due to reduced demand and high LNG spot prices.