China’s LNG prices to drop on rising supply, falling demand

23 January 2013 08:17  [Source: ICIS news]

SINGAPORE (ICIS)--Liquefied natural gas (LNG) prices in China are expected to decline from 24 January because of further rising domestic supply and falling downstream demand, a major LNG supplier based in north China said on Wednesday.

China’s domestic LNG supplies have been increasing since 19 January as more LNG producers restarted their units in line with rebounding gas supplies, several plant sources said.

The average operating rate of China’s gas liquefaction facilities rose to 57% on 22 January, compared with 46% in the beginning of the month, according to data compiled by ICIS C1 Energy.

“Gas supplies to LNG plants have increased as piped gas demand decreased in line with warming weather in some regions and operation suspensions among some industrial users,” said a source from PetroChina’s Changqing Oilfield, a major on-shore gas producer in China.

LNG outputs in southwest China, for example, rose to 1.4m cubic metres (cbm)/day after two major local producers, with a combined liquefaction capacity of 2m cbm/day, restarted their plants on 20 January, said a source from one of the plants.

There are four major liquefaction facilities in southwest China with a total capacity of 2.45m cbm/day.

Meanwhile, downstream demand started to drop  as some industrial users in east and south China halted operations in preparation for the Lunar New Year holiday in the first half of February, several LNG suppliers and traders said.

Most domestic LNG suppliers kept their EXW (ex-works) prices stable in view of smooth sales earlier this month, the plant sources said.

There is also a strong wait-and-see sentiment in the market as Shenzhen Dapeng Marketing, a major trader of imported LNG in south China, has not finalised its February offers yet, the sources added.

Domestic LNG producers are expected to reduce their EXW prices under high inventory pressure on the back of rising supplies, the supplier based in north China said.

“However, the cut won’t be much as some producers may reduce production in view of weak demand,” added the supplier.

By: Jane Han

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