The Global Gas Crunch Is Set To Worsen As China Reopens

• Chinese energy major CNOOC has forecast a seven percent increase in the country’s natural gas imports next year.
• The energy giant is already looking for LNG cargoes for next year as the country continues to ease its Covid restrictions.
• Pipeline imports from Central Asia are in decline while gas inventories in the north are already depleting at a faster rate than usual.

China’s natural gas imports are set for a 7-percent rise next year as the country reopens after Covid lockdowns, which could aggravate an already tight supply situation globally.

The 7-percent import increase forecast was made by state-owned energy major CNOOC, which said, as quoted by Bloomberg, that it was already looking for LNG cargoes for next year.

The report notes that gas inventories at ports in the northern part of the country are depleting at a faster rate than usual because the weather is colder, pushing consumption higher, and this will, too, have an effect on future demand for imports.

What’s more, pipeline supply of natural gas from Central Asia is in decline, which means China will need to rely more on LNG in its gas import mix to make up the difference. And this means more intense competition for a limited number of cargoes between Asia and Europe next year as well.

This year, Chinese gas demand has been trending lower for most of the year, with imports declining consistently over the first ten months of the year, per a report by Energy Intelligence. LNG imports were down by a sizeable 21.6 percent over the ten-month period, reflecting the effects of lockdowns and other restrictions under the country’s zero-Covid policy.

Yet now this policy is being reversed, mass mandatory testing is being dropped and analysts expect a rebound in economic activity before too long. This will drive higher demand for energy and contribute to higher prices due to the tight supply situation in both oil and gas.

This reversal of Beijing’s Covid policy surprised many, who expected tepid demand for energy to continue in one of the world’s largest consumers. If activity rebounds fast, securing sufficient gas supply for the next heating season will likely become a major problem for most importers.

By Irina Slav for Oilprice.com

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