Via Oilprice.com

Natural Gas

Slowing gas demand in China is set to pressure international gas prices further, adding to the burden of producers, some of whom already have to deal with excess supply.

Bloomberg quoted a researcher from China’s economic planning authority, who said at a BloombergNEF event in Shanghai that over the next five years, China’s demand for gas will slow down, especially in the liquefied natural gas department. The reasons for the slowdown will be economic: forecasters expect slower GDP growth in the world’s second-largest economy. Not last because of the continued trade war with the United States.

For LNG exporters, however, the bad news is rising domestic production and the launch of a new pipeline that will send 38 billion cubic meters of gas to China by 2024.

The Power of Siberia launched officially on Monday, with China’s and Russia’s presidents hailing the infrastructure as a cornerstone in bilateral relations. The two have a 30-year contract for gas supplies and these are bound to undermine Chinese LNG demand.

Domestic production will also take a chunk out of that particular gas demand segment as Beijing seeks to reduce its overwhelming reliance on imports. Tariffs on U.S. LNG imports will not help producers either.

China has been the biggest driver of global gas demand in recent years, while the United States has been the driver of supply growth. This growth has been so spectacular it resulted in negative gas prices on several occasions this year. As a result, now gas producers are slowing down the pace of growth, freezing spending for 2020.

READ ALSO  Soaring Number Of COVID Cases Caps Oil Prices

Meanwhile, Henry Hub benchmark prices hit the lowest since 2013 at the end of November, S&P Global Platts reported earlier this week. The reason behind the slump was the weather forecast, which is suggesting milder weather than the industry would like to see. The effect of the news about China’s demand prospects will take some time to sink in but there is no doubt once it does, it will keep prices under pressure.

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:

Download The Free Oilprice App Today


Back to homepage