Chinese buyers offer to resell LNG cargoes as they struggle with weak demand
Chinese companies are offering to resell liquefied natural gas cargoes in the spot market as they grapple with high inventory amid weak demand due to a slowing economy and a milder than usual winter, several trade sources said.
Tanker trucks carrying liquefied natural gas (LNG) from ENN group's LNG terminal cross the Xihoumen Bridge in Zhoushan, Zhejiang province, China July 31, 2019. Picture taken July 31, 2019. REUTERS/Stringer
The world’s second-largest buyer of LNG is currently facing high inventory of the super-chilled fuel in some areas, several sources familiar with the Chinese market told Reuters.
“It’s quite warm in China and the demand is very bad,” one of the sources with a state-owned company said, declining to be named as he was not authorized to speak with media.
He added that about 5 to 7 LNG cargoes are being offered for resale in a month, though this could not be independently verified. Further details were also not immediately available but sources say the main company to offer cargoes for re-sale has been China National Offshore Oil Corporation (CNOOC).
CNOOC did not immediately reply to Reuters request for comment but the sources added that CNOOC has so far sold at least one cargo to a Japanese buyer.
A second source added that buyers in northeast China may be facing ‘tank-tops’ which refers to storage tanks being full.
China does not release any official information on its LNG storage volumes but shipping data by Refinitiv Eikon shows that the country imported the second highest monthly volumes of LNG for the year in November.
The import volumes, however, likely comprise mainly term volumes, which had already been committed for purchase by buyers, or spot volumes purchased earlier in the year, the sources said.
Temperature forecasts for Beijing and Shanghai are expected to be warmer than usual until mid-January, according to Refinitiv’s weather data.
China’s natural gas demand is expected to expand at half the rate this winter compared to a year earlier, as Beijing slows its gasification push due to a weaker economy and competition from cheaper coal, state oil officials said last month.
State-owned companies are also facing additional pressure as their typical customers such as Guangzhou Gas and Guangdong Energy Group are now importing spot cargoes directly from the international market, the sources added.
Reporting by Jessica Jaganathan, additional reporting by Muyu Xu in BEIJING, editing by Louise Heavens
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