China Cuts LNG Imports as Cheap Domestic Gas Undercuts Global Prices

China is importing less liquefied natural gas (LNG) despite entering the peak demand season, due to an abundant domestic gas supply that has resulted in lower prices. The national average for LNG in China stood at $21.97 per million British thermal units (mmBtu) as of today, nearly $10 below the Japan/Korea market benchmark, according to Bloomberg.

The drop in gas prices follows state-owned energy companies completing their gas stockpiling efforts and starting to release gas from inventory. This ample domestic supply has made spot market LNG purchases unappealing for Chinese buyers, who are known to be highly sensitive to prices. Earlier this year, Chinese energy traders reduced LNG imports when prices reached $20 per mmBtu, and the curbs endured into September as prices remained high.

Chinese gas buyers are also seeking alternatives to Middle Eastern LNG. This development is beneficial for other Asian LNG importers and Europe, as both regions strive to stockpile enough gas for winter. European buyers, with deeper resources, often outbid Asian buyers when prices become too high to deter further purchases. In late October, LNG prices on the Asian spot market surged to $30 per mmBtu for the first time since December 2022, due to disruptions in Qatar's LNG exports and a growing disparity between global demand and supply, despite increased U.S. exports.

However, European futures market prices have fallen from over €100 per MWh to €86.80, reflecting renewed optimism about the Middle East following Democrats' victories in the U.S. midterm elections.