The price of liquefied natural gas is expected to fluctuate in line with seasonal demand in China, with the big Asian buyer increasingly playing a role in determining the value of the supercooled fuel, according to a leading energy trader.
“We expect weaker summers and stronger winters,” said Pablo Escobar, head of global LNG at Vitol, the largest independent energy trader. “The seasonality will be more accentuated.”
China’s sudden shift from coal to gas for power generation and heating late last year created a domestic shortage in supplies, surprising LNG market players and causing a spike in the price of spot cargoes in the winter.
Limited gas storage capacity means China cannot buy and store LNG when it is cheap in warmer months like other buyers. Mr Escobar said this means the market will continue to respond to Chinese purchasing trends.
Asian LNG prices surged to a three-year high of more than $11 per million British thermal units at the end of 2017.
Speaking at the International Petroleum Week conference in London, Mr Escobar, however, warned that Chinese buying would not be as robust in the winter of this year compared with a very strong 2017. He also said new supplies from around the world were coming online.
Andrew Walker, an executive at US LNG group Cheniere Energy, who was speaking on the same panel, said he did not see an oversupplied market and believed China would not disappoint this year.
“Supply is visible but demand is less visible,” said Mr Walker. “China will surprise us with another year of growth.”
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