China is scaling back its imports of liquefied natural gas (LNG) despite the onset of peak demand season, driven by a surplus of domestic gas supplies that have pushed prices lower. The national average price for LNG in China stood at $21.97 per million British thermal units (mmBtu) today, nearly $10 below the Japan/Korea Marker benchmark, according to Bloomberg. This price drop follows the completion of stockpiling efforts by state-owned energy majors, who are now releasing gas from inventory, reducing the need for spot market purchases.
The abundant domestic supply has made LNG imports less attractive for Chinese buyers, who are also exploring alternatives to Middle Eastern LNG. China, being one of the world's largest LNG buyers, has historically been sensitive to price fluctuations. Earlier this year, Chinese energy traders reduced LNG imports when prices exceeded $20 per mmBtu, a trend that continued into September as prices remained high.
The shift in China's LNG import strategy is beneficial for other Asian and European importers, who are competing to secure sufficient gas for winter. European buyers, with deeper pockets, often outbid Asian counterparts when prices rise, discouraging Asian purchases. In late October, Asian spot market LNG prices surged to over $30 per mmBtu for the first time since December 2022, driven by disruptions in Qatar's LNG exports and a global supply-demand imbalance, despite rising U.S. exports.
Meanwhile, European futures market prices have declined from over €100 per megawatt-hour (MWh) to €86.80, likely due to renewed optimism about the Middle East following Democratic gains in the U.S. Congress.