China’s winter misery brings LNG traders the gift of volatility
Traders and energy companies with access to tankers and uncommitted supply are positioned to benefit, analyst says
China’s self-inflicted heating crisis this winter signals deeper seasonal price swings that might be a boon for liquefied natural gas traders.
The arrival of a price-depressing glut of the fuel is no longer seen as inevitable. Instead, China’s surging winter heating needs will create larger summer-winter splits in the global LNG market and exacerbate price swings. That is what has happened this year, as the cost of spot cargoes has nearly doubled since June.
It is yet another ripple effect of China’s quest for cleaner skies, as policies forcing homes and factories to switch from burning coal to natural gas have reduced smog in Beijing while also creating shortages of the heating fuel in frigid northern cities. Traders and energy companies with access to tankers and uncommitted supply are positioned to benefit, Kerry-Anne Shanks, an analyst at Wood Mackenzie, said.
“We see a market developing that’s quite strong in the winter, and in the summer is loose,” she said. “It plays to the strengths of portfolio players who have the flexibility to deliver supplies to the premium markets.”
