Qatar's empty shelves pose upside risk for Asian gas prices

Doha’s bumper sales will also ring alarm bells for other regions reliant on Qatari LNG such as Europe and may further boost Asian spot prices, which have already surged 55% since September.

Despite widespread forecasts of an LNG glut, China’s shift to gas this year as it moved millions of households away from coal to combat smog has lifted its LNG imports by 43% and squeezed global gas markets.

But some traders are split on the sustainability of the rally, citing weather, crude oil price movements and the degree of residual demand left in China as big unknowns that could potentially dampen prices.

Normally Qatar plays the role of swing supplier to global LNG markets, churning out cargoes to cover demand spikes.

This time, Asian markets face a knife-edge balancing act as state-run Qatargas – catering to China, Japan and Europe – is booked out until April while peer Rasgas – covering South Korea, Taiwan and India - holds just a handful of free cargoes in February and March.

A large part of China’s surplus demand was filled by Qatar through fresh sales and even tweaks to existing long-contracts.

The producer shipped 600% more LNG to China in May from a year ago, 77% more in June, 400% more in July, 150% more in August and 215% more in September.

That trend should continue through the winter, as the Gulf state adapts to long-term buyers’ needs to hold on to its share of the prized Asian market.

Qatar also found buyers beyond China as rising coal and crude oil prices and nuclear supply shortfalls propped up spot LNG demand in India, Taiwan and South Korea, further emptying its shelves.

Qatar’s absence from spot markets may be felt in higher LNG prices which some traders predict may hit three-year highs above US$11 per mmBtu this winter, from US$9.40 per mmBtu currently.

The shift in sentiment has bulls wondering whether forecasts of global LNG markets re-balancing in the early 2020s may not be wide of the mark given the quickening pace of Chinese consumption growth.

Bears urge caution, however, ahead of the imminent start-up of new liquefaction plants in the US, Russia and Australia and the alternatives to LNG that Beijing has on offer.

For example, China’s piped gas imports from Central Asia and Myanmar soared to a record 3.4 million t in September, the latest month for which data is available and well ahead of the 2.5 million t shipped in by tanker.

PetroChina is also near the limit on how much more LNG it can bring into its fully booked import terminals this winter, though peer CNOOC has room for manoeuvre, fuelling trader speculation of potential gas swaps if shortfalls emerge.

Read the article online at: https://www.lngindustry.com/regasification/15112017/qatars-empty-shelves-pose-upside-risk-for-asian-gas-prices/