Cheaper China gas cools appetite for pricey LNG cargoes

Prices and immediate market effects

Since Wednesday, trucked LNG has gotten cheaper as several liquefaction plants near inland fields cut offers sharply. GasTank data puts Monday's national average at $21.97 per million British thermal units, roughly $9.70 under JKM futures.

As international spot benchmarks hover close to a four-year peak, the gap renders incremental spot cargoes uneconomical for many Chinese buyers. As GasTank director Huang Qing said, "When costs get too high, demand drops."

Demand, storage, and global knock ons

The retreat coincides with state energy firms wrapping up winter stockpiles and getting ready to start large-scale withdrawals next week. Beijing has also asked LNG terminals to keep inventories around 80% into winter as part of stepped-up supply security amid the Middle East conflict.

If China largely sits out the spot market, global tightness could ease, reducing the tussle between Asian and European buyers over flexible cargoes and potentially shrinking Asia's price premium to Europe. China National Petroleum Corp. forecasts that softer demand will push the domestic market into surplus this winter, and adds that Asian spot LNG prices could come in at an average as high as $30 per million Btu, exceeding the approximate $22 affordability threshold for Chinese industrial users.

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Why domestic supply and demand matter for your portfolio

State-backed China Petrochemical News links the slowdown in demand to sluggish industrial activity, elevated gas expenses, and a shift from LNG-powered trucks toward new-energy vehicles. It estimates LNG import levels will decline by 3.8% to 7.5% this winter versus a year ago.

China is leaning on local fuels to cut exposure to external shocks. Coalbed methane output has hit records in Shanxi, and a long-shelved coal-to-gas project began deliveries earlier this month in Liaoning. Those extra domestic supplies give buyers more room to avoid pricey spot LNG, leaving weather as the main swing factor for demand. The bottom line: if China buys fewer spot cargoes, winter price spikes in Asia and Europe look less severe, a potential tailwind for energy importers and a headwind for LNG sellers in your portfolio.

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