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Global inventories of liquefied natural gas have increased this month driven by weaker demand, Reuters has reported, noting demand is about to recover in the summer.
At 550,000 ton as of April 20, per Kpler data, LNG in floating storage around the world is almost twice as much as it was this time last year, the report also noted.
The increase in inventories is driven chiefly by lower demand from the three biggest LNG importers in the world: China, Japan, and South Korea.
"There are currently more floating volumes on a global level and the increase is coming out of Asia... Reflecting tepid demand from major consumers Japan, China, and South Korea," a Kpler analyst told Reuters.
Last month, a senior PetroChina executive cautioned that the outlook on the country’s LNG demand this year was uncertain, even though gas demand as a whole was seen rising. According to Yaoyu Zhang, general manager of global LNG and new energies at the state major, LNG demand would depend on spot prices.
Japan, meanwhile, is looking for long-term supply and as part of efforts to secure that, Mitsui, one of the largest commodity traders in the country, recently bought gas-producing assets in Texas with access to LNG facilities on the Gulf Coast.
In South Korea, a reconsideration of nuclear energy is threatening long-term demand for LNG, Natural Gas World reported recently. South Korea uses half of its LNG supply for power generation.
The Institute for Energy Economics and Financial Analysis noted in a recent report Asian demand for LNG has continued declining during the first quarter of the year on the back of a mild winter and high prices. Notably, even when prices fell palpably, demand remained weak, the IEEFA noted.
The think tank forecast continued weakness in LNG demand from the three largest Asian consumers and attributed it to a ramp-up of nuclear. In Japan, the IEEFA reported, nuclear reactor restarts could wipe out about 6 million tons in annual LNG demand, or 8 percent of Japan’s annual imports for 2022.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.