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China Orders Regions To ‘Regulate’ Surging Natural Gas Prices

LNG

China’s state planning commission has ordered eight Chinese regions to “regulate” surging gas prices amid winter heating demand and the switch to gas from coal, by meeting on Monday with natural gas producers, LNG terminal operators, and traders, Reuters reports, quoting an official at the National Development and Reform Commission (NDRC).  

The eight regions are the leading natural gas producing regions Shaanxi, Inner Mongolia, Xinjiang, and Sichuan, as well as the biggest gas-consuming regions Hebei, Jiangsu, Liaoning, and Beijing, according to the NDRC official who spoke to Reuters.

The meetings to ‘regulate’ the prices should be a warning that the Chinese government could punish any market participants and companies that could be found to have manipulated the market or the prices, the official told Reuters. 

Ahead of the winter season, Chinese buyers of LNG had already pushed LNG prices higher as millions of Chinese households make the switch from coal to natural gas for the first time this winter season. China has been buying up LNG cargoes on the spot market, pushing spot prices higher than the prices of the oil-indexed LNG cargos in the long-term delivery contracts.

Last week, Asia’s LNG spot prices jumped to the highest since January 2015 due to the Chinese demand and strong oil prices.

Related: Russia Ups Oil Price Forecast For 2018

China’s imports of LNG between January and October this year soared by 47 percent compared to the same period last year, according to Platts. 

According to Thomson Reuters Eikon shipping data, China’s LNG imports most likely hit a record-high in November, topping 4 million tons for the first time ever, and breaking the previous record of 3.7 million tons set in December last year. 

Even with surging LNG imports, Chinese regions in the north have been experiencing gas supply shortages in recent weeks, due to China ramping up efforts to move from coal to gas, and to a cold spell in the country. Last week, there was rationing of natural gas supply in the industrial province Hebei that surrounds Beijing, the Financial Times reports.

By Tsvetana Paraskova for Oilprice.com

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