China National Offshore Oil Corporation (CNOOC), the country’s largest importer of liquefied natural gas (LNG), has declared force majeure on deliveries of LNG cargoes and will not be honoring some of the deliveries because of the deadly coronavirus outbreak, Bloomberg reported on Thursday, quoting a notice that the Chinese firm had sent to suppliers.
CNOOC has declared force majeure on prompt LNG supplies from at least three sellers for purchases this month and next, sources told Reuters.
A week ago, the China Council for The Promotion of International Trade (CCPIT) announced that it would issue force majeure certificates to Chinese companies that have difficulties in meeting contract obligations with overseas partners amid the coronavirus outbreak and its fallout on the Chinese industrial activity and economy.
“Some Chinese companies have suffered severe impacts on goods and logistics and may not be able to fulfil their contracts amid the coronavirus,” the CCPIT said in a statement at the end of January, as carried by Reuters.
CNOOC’s move this week is yet another blow to the already depressed LNG market this year.
Even before Chinese importers started invoking force majeure on LNG deliveries, LNG prices had hit a decade low, due to warmer winter weather in many parts of Asia, booming new LNG supply—especially from the U.S. and Australia—and slower import growth in China.
Now the global LNG market has to contend with the ‘black swan’ event of additionally depressed demand due to the lower industrial and economic activity in China in the wake of the coronavirus outbreak.
Traders are struggling to find buyers of LNG in Asia outside China, where spot purchases of LNG and other energy products have almost stopped, traders have told Reuters.
The virus outbreak and China’s markedly decreased demand for LNG, as well as for crude oil, are leaving traders scrambling to find alternative spot buyers and is highlight China’s importance to the global energy commodity markets.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More