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Oil refiners in Japan have been asked by power-generating firms to provide additional oil supply to utilities, which are struggling to secure liquefied natural gas (LNG) at very high prices.
“Spot LNG prices have risen considerably and we have received requests from electric utilities that want to use oil as a substitute,” Tsutomu Sugimori, president of the Petroleum Association of Japan (PAJ), said on Wednesday as carried by Reuters.
Last week, the spot LNG price for December delivery into Northeast Asia was around $34.50 per metric million British thermal units (mmBtu), down by $3.90 on the previous week, per industry sources cited by Reuters.
Prices are off the records seen in the past month, but they remain at very high levels amid a natural gas crunch from Europe to Asia.
Utilities that can burn oil and oil products instead of gas have already started to switch away from the expensive gas, boosting global oil demand.
Earlier this month, Saudi Aramco’s chief executive Amin Nasser said that the natural gas crunch had raised global oil demand by 500,000 bpd.
The International Energy Agency (IEA) said in its Oil Market Report for October that the energy crisis had spurred a switch to oil products from natural gas. This, the IEA says, could raise global oil demand by 500,000 bpd compared with “normal conditions,” or a market in which energy and power prices are not setting record highs.
Japan has joined other major oil-consuming nations, including the U.S. and India, in calling on the OPEC+ group to boost crude supply to the market.
Industry minister Koichi Hagiuda was quoted as saying that the calls would continue until the next OPEC+ meeting, which is scheduled for November 4. Meanwhile, Japan’s foreign minister has talked with his Kuwaiti counterpart specifically about a potential increase in supplies.
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.