Japan's industry ministry sees LNG stocks recovering towards winter

(Reuters) - LNG stocks held by Japan's major electricity utilities will likely increase towards the peak winter demand season, the industry ministry said on Wednesday, after stocks fell to their lowest since early 2021.

LNG stocks have been declining since May as a long, hot summer boosted the use of air-conditioners, lifting demand for power and fuels.

LNG inventories held by major Japanese power companies, a key indicator of the country's stock levels, were down to 1.56 million metric tons as of Sept. 24, data released by Japan's Ministry of Economy, Trade and Industry (METI) showed.

That was below the five-year average for the time of year and the lowest since January 2021.

Japan was the world's biggest LNG buyer in 2022. Electric utilities hold about half of the country's LNG inventories, with the remaining held by city gas suppliers.

"The utilities usually build up inventories from summer to fall, but the longer-than-usual summer heat has caused inventory levels to drop," Kaname Ogawa, director of the METI's electricity infrastructure division, said.

"But we expect a recovery from now," he told an expert committee on basic policy for electricity and gas.

For this winter, major utilities have secured the fuel needed to meet the same level of demand as in past winters, the ministry said in presentation material.

Japan saw the highest average temperature for the summer since records began in 1898, with the average temperature for the June-August surpassing the 30-year average by 1.76 degrees Celsius, according to the Japan Meteorological Agency.

For the winter, the METI estimates all regions have a reserve ratio of power generation capacity of 5%, above the minimum threshold of 3% deemed necessary to ensure stable supply.

"With the ratio higher than the past two years, it looks unnecessary to conduct any public auctions to secure additional power supply capacity," Ogawa said.

"Still, this is not a relief as many old thermal power stations support the 5% ratio. We'll take measures if needed," he said.

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