Industry Trend Analysis - China LNG Demand To Distort Prices - DEC 2017

BMI View : The heavy concentration of global LNG demand growth in China is altering seasonal price dynamics and increasing the risk of demand-side shocks to prices. Beyond 20 20 these risks will partially subside, due to increasing diversity in the global LNG market and the growth of pipeline gas supplies into China.

We have revised up our Q417 and Q118 LNG price expectations to reflect stronger demand from China and - relatedly - increasing seasonality in Asian spot LNG prices. Our forecasts now assume prices for the Singapore SLInG to average around USD8.5/mnBTU for Q4 and USD7.5/mnBTU for Q1 - an upward revision of around USD0.5/mnBTU. Supply is loosening incrementally and gas stockpiles in China are reportedly high for the time of year. However, given the lumpiness of the LNG market, there remain significant upside risks to prices, in the case of major unplanned supply outages or a cold snap in the northern hemisphere.

Demand in China has risen aggressively in 2017, backed by strong support from Beijing ( see ' Winter, Prices To Drive Short-Term Gas Demand ' , October 23). Domestic consumption rose by 18.0% y-o-y in the first eight months of 2017, eclipsing the growth in supply and spiking demand for imports. Supply outages in Central Asia and Myanmar, favourable price dynamics and ease of access to key coastal demand centres has favoured LNG over pipeline gas, with imports rising 43.0% y-o-y in 3Q17.

Import Demand Soaring
China Monthly LNG Imports, mn mt
Source: BMI, Bloomberg, China Customs

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