Commodities
Global gas market outlook – lurking danger: China could turn the gas market upside down
Published
3 weeks agoon
By
letizo News
The global gas market outlook is bleak. The temporary decline in demand for LNG in China hides a great danger for the global gas market.
The main surprise of the current situation on the global gas market is the strange behavior of Beijing. While everyone is scrambling around looking for liquefied natural gas (LNG) carriers, there is a strange calm in the Middle Kingdom, which was the world’s main LNG importer last year. The “Chinese anomaly,” however, has a simple explanation.
Global gas market overview – the actions of Chinese traders
Gas market analysts cannot give any precise forecasts. Chinese traders have decided to take a risk and not buy LNG at astronomically high prices. They expect Beijing to continue its zero-tolerance policy towards Covid-19, which significantly restrains the growth of fuel and energy demand in the country. Naturally, traders don’t want to buy LNG at very high prices in advance, which Chinese refineries don’t really need right now.
“This means,” Bloomberg quotes Toby Copson of Trident LNG as explaining, “that China’s (gas) supply is fine and that they have enough pipeline gas and their own coal, at least for now.
In the first six months of 2022, China’s LNG imports were down by about 20%. This is certain to cause China to lose its status as the planet’s top LNG importer this year.
Of course, Chinese traders are taking a big risk by not buying LNG now. If temperatures drop sharply in the fall or winter, or if the Chinese economy returns to its normal growth rate when the pandemic is over and restrictions are relaxed, they will be in a tight spot. In that case, they will have to return to the market urgently, with all the consequences that entails. The main thing for the market and its participants is that the return of Chinese buyers will further exacerbate the LNG shortage and increase LNG prices.
You don’t have to look far for examples. In January 2021, abnormally cold temperatures prevailed over much of China. Chinese traders then rushed to the spot market to buy LNG, causing the price to skyrocket.
The current sluggishness of Chinese traders on the gas spot market gives buyers from other Asian and European countries the opportunity to fill their storage tanks with gas. It has gotten to the point where Chinese companies are now reselling surplus LNG to Europeans.
The Chinese government will of course try to avoid buying LNG at the current very high prices. First, Chinese miners have been ordered from above to sharply increase coal production. In the first half of the year, it passed the 2.2 billion ton mark, according to China’s National Energy Administration, an 11% increase over the first six months of 2021.
Second, Beijing is increasing imports of cheap pipeline gas, mostly from Russia, and increasing production of its own “blue fuel.
China’s energy demand has now declined, mainly due to the coronavirus pandemic, which has not let the Middle Kingdom out of its clinging embrace this year. Lockdowns, which are causing huge damage to the economy, nearly caused a downturn in the Chinese economy in the second quarter.
How long will the “Chinese anomaly” last?
Against the backdrop of what is happening, analyzing and predicting global gas market growth is difficult. No one is willing to predict how long the “Chinese anomaly” will last. President Xi Jinping has repeatedly stated Beijing’s commitment to zero tolerance for coronavirus. This means that lockdowns and restrictions will not go away. The latest major city to begin imposing restrictions this week is Shenzhen, the largest economic center in the south of the country, dubbed China’s Silicon Valley.
Despite the ongoing fight against the pandemic, China’s economy showed clear signs of recovery in July. Goldman Sachs analysts predict a surge in business activity in China in the coming months, which will undoubtedly be felt by the entire planet and, above all, by gas markets.
The return of Chinese gas importers to the spot market means a sharp increase in competition between Asian buyers for LNG carriers and Europeans. Europe will have to further reduce gas consumption to be better prepared for the coming winter and pump as much gas as possible into underground storage facilities.
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Commodities
Experts named the main reasons for increase in gas prices in the European Union
Published
2 days agoon
August 16, 2022By
letizo News
Problems with the restoration of full operation of the Nord Stream pipeline continue to put pressure on gas futures prices in Europe, and this factor remains the key reason for the increase in gas prices.
Exchange gas prices in Europe began last week near $2,100 per thousand cubic meters and rose gradually. This week, the growth accelerated: Monday prices were over $2,400 per thousand cubic meters for the first time since early March, and at the opening of trading on Tuesday they were over the $2,600 mark.
Why do gas prices keep going up?
Why do gas prices keep going up? Last week, gas prices in the EU started going up again. It was caused by Gazprom’s statement that anti-Russian sanctions hamper resolution of the situation with transportation and repair of Siemens engines for the Nord Stream pipeline.
The analysts also singled out additional price growth factors. Intensification of upward gas price dynamics might have been provoked by a stoppage of annual preventive maintenance of some capacities of Norwegian gas field Troll and gas treatment unit Kollsnes from August 13 to the end of the month. This led to a fall in production capacity of 20 million cubic meters of gas during this period.
It is worth noting the atypically high temperatures in Europe, which lead, on the one hand, to a rise in demand for electricity, for air conditioning, and, on the other hand, to a reduction in hydropower generation amid droughts in some regions, notably in France.
Moreover, according to the association WindEurope, wind generation in the European Union remains below the norm, which is usually 11-20% in summer. On August 15, the share of wind power generation was 9.5% of the total. This factor could also increase demand for gas.
We previously reported that Oil prices fell again at the start of Monday’s trading.
Commodities
Natural gas prices in Europe exceed $2,600
Published
2 days agoon
August 16, 2022By
letizo News
Natural gas prices on the London Stock Exchange ICE record rose to more than $2,600 per thousand cubic meters for the first time since early March, according to the site.
At the time of publication, the September futures on the Dutch TTF hub were worth 250.395 euros per kilowatt-hour, or $2,693.17 per thousand cubic meters.
The sharp rise in the cost of gas in Europe on the exchanges is because there is a full shortage of this: gas, supplies from Russia have been reduced, LNG is expensive on the international market and it can not fully replace the supply of Russian gas, expensive petroleum products and coal.
The increase over the last 24 hours was 13.75 percent. The rise in gas prices is due to the abnormal drought in Europe and the interruption of Russian fuel supplies. The latter are now running at 20 percent of standard capacity.
We previously reported that Saudi Aramco sees no strong impact on its position in Asia.
Commodities
Oil is getting cheaper — What’s going on in the commodities market?
Published
2 days agoon
August 16, 2022By
letizo News
Oil is getting cheaper. Oil quotes are falling Tuesday night due to concerns about slowing global economic growth and weakening demand for fuel.
It became known the day before that growth in retail sales and industrial production in China in July was weaker than analysts’ forecasts.
Retail sales rose by 2.7% year-on-year instead of the expected 5% growth. China’s industrial production growth slowed to 3.8% last month from 3.9% in June, while analysts’ consensus forecast was 4.6%.
Is oil getting cheaper? Why It’s Getting Cheaper
To support China’s economy, the People’s Bank of China injected 400 billion yuan (nearly $60 billion) into the financial system as part of its medium-term lending (MLF) program and also cut the rate on one-year MLF loans by 10 basis points, to 2.75% per year.
“This unexpected decision gave the impression that the central bank was concerned about the scale of the weakening economy,” wrote Commerzbank (ETR:CBKG) analyst Carsten Fritsch. — In our view, problems in the real estate sector, combined with a zero-tolerance coronavirus strategy, are likely to continue to weigh on the economy in the short to medium term, meaning it will be a persistent negative factor for oil prices.”
October Brent futures on the ICE Futures Exchange in London had fallen $1.10 (1.16%) to $94.00 per barrel by 5:56pm Moscow time.
At the same time, quotations for WTI futures for September at NYMEX decreased by $0.98 (1.10%) — to $88.43 per barrel.
We previously reported that oil prices have stepped up their fall.
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