Chinese LNG buyers acted early to build gas stockpiles amid the Iran war, helping the world’s top LNG importer stock up enough inventories ahead of the winter, industry analysts have told Bloomberg.
As of the end of September, China’s underground gas storage was 80% full, according to Rystad Energy’s analyst Xiong Wei.
Lower demand for spot supply from China this winter could mean relief for other LNG customers in Asia and Europe, many of which have been struggling with high spot LNG prices and intensified competition for supply that doesn’t need to transit the Strait of Hormuz.
Moreover, current weather models suggest that the super El Niño is expected to raise the winter temperatures in South Korea, Japan, and parts of China, potentially easing the gas supply needs in these key Asian LNG importers and leaving more cargoes for Europe.
A potential easing of gas demand in Asia could be welcome news in Europe, where gas storage sites are only 74% full as of this week, compared to more than 86% for this time of year for the previous five years.
Current forecasts also suggest a slightly warmer winter in Europe, at least through January 2027, which could ease the strain on Asian and European LNG import needs at a time when supply from Qatar remains severely disrupted by the closure of the Strait of Hormuz.
Despite the currently favorable weather forecast for the coming winter, gas supply and prices in both Europe and Asia remain at the mercy of developments in the conflict in the Middle East.
With supply concerns growing, European gas prices remain at the levels seen in the 2022-2023 energy crisis as LNG supply from the Middle East has not recovered at the same pace oil flows have. LNG flows from the Middle East remain about 80% lower compared to last year’s volumes.
“Unfortunately for the natural gas market, we have not seen a similar recovery in LNG flows from the Persian Gulf as we have with oil,” Warren Patterson, Head of Commodities Strategy at ING, said in a note on Thursday.
By Tsvetana Paraskova for Oilprice.com
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