By Bloomberg News (Bloomberg) —
China told its state-owned gas importers to stop reselling LNG to energy-starved buyers in Europe and Asia in order to ensure its own supply for the winter heating season.
The National Development and Reform Commission, the nation’s top economic planner, asked PetroChina Co., Sinopec and Cnooc Ltd. to keep winter cargoes for domestic use, according to people with knowledge of the matter who asked not to be named as the information isn’t public. While the sales had offered some relief to European buyers, rapidly filling inventories and record-high shipping costs also reduced the appeal of reshipping fuel, they said.
The commission did not immediately response to a fax seeking comment. The state-owned firms didn’t respond to requests for comment.
Forecasts for a small gas supply deficit likely spurred the move by Beijing, which has pledged to keep houses warmed this winter. The resales had marked a stark turnaround for China, which last year overtook Japan to become the world’s biggest importer of LNG on the back of increased purchases on the spot market but may post its first ever drop in gas consumption in 2022.
Energy importers will be closely monitoring top leaders gathered in the Chinese capital for a weeklong party congress. President Xi Jinping highlighted energy security in his two-hour long speech on Sunday, repeating rhetoric that the nation must move ahead with its green transition in a prudent manner to avoid the risks of a supply crunch.
Gas prices in Europe have fallen almost 60% from a high in August, though they are still at a record for the time of year as the region seeks to avoid supply from Russia following its February invasion of Ukraine. A flood of LNG shipments to Europe is weighing on the region’s spot prices, making some suppliers consider rerouting shipments back to Asia where rates are more attractive.
Still, a move by China to secure its own supply could drain shipments to Europe and exacerbate the region’s energy crunch in the case of a cold winter. China holds large contracts to purchase LNG from exporters like the US, with the Asian nation’s traders diverting some of that supply to Europe this year amid lackluster demand at home.
© 2022 Bloomberg L.P.
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