Gas Requisition to Drive China LNG Price Accruing

On November 14, most LNG plants in Northwest China received the official notification from NDRC on the natural gas requisition in winter, and the overall scale was set around 30%-70%. Some plants had reduced the production load and were preparing for the downtime. Accordingly, the market supply shrank obviously, and the LNG spot cargoes began to soar in prices.

The price actually dropped earlier this month due to the adequate imported resources and high-load domestic production, and the price was at a relatively low position. It dropped continuously by RMB 200-300.mt in two weeks and touched the bottom on November 15. Then, due to the requisition, LNG started to raise offers firmly, and the average ex-works price rose by RMB 200-300/mt in one day.

Along with the official beginning of the winter peaking season from November 15, the supply situation in northern China will become critical with a severe shortage for residential natural gas support, and the LNG price benefits from it. However, later most industrial natural gas consumers will be restricted or even be halted in production for the sake of the peak-shaving consideration, and the extremely high LNG price also ferments the reluctance of the rest buyers on the price. Therefore, the LNG price tendency in late November and early December is still in a mist. According to SCI analyst, the price will eventually rise, despite the current high price level already, but the crest may be later than previous years, also because of the current high price level.