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An early winter spell in North Asia is expected to raise oil, gas, and coal demand for power plants and domestic heating, which means there are big chances that fossil fuel prices in the region would further increase, analysts believe.
According to experts in commodity markets, the La Nina weather pattern - which results in colder than usual temperatures in the equatorial Pacific Ocean – is responsible for the lower-than-normal temperatures in South Korea, China and Japan.
China’s oil production plunged to a seven-year-low in October as oil producers are still hesitant to raise crude output without knowing where oil prices are heading.
For coal, Chinese imports jumped with winter demand and lower domestic production as the country is trying to fight air pollution, according to Reuters. As a result, the price of coal in Asia has doubled in the past five months.
The strong demand is also leading to a surge in LNG prices in Asia, and it has already jumped to a one-year high.
“Compared to where we've seen coal and gas prices in spring and summer, we'll see stronger growth (in prices) over the next three months,” Gavin Thompson, head of China research at commodity consultancy Wood Mackenzie, told Reuters.
South Korea is also feeling the chill, with oil refiners there expect heating oil demand to increase and lead to higher refining margins. Refineries are running at full capacity and are shifting towards refining more kerosene and less jet fuel, traders polled by Reuters say.
Asia’s oil refining margins have jumped by 54 percent over the past month and a half.
South Korea’s imports of coal ticked up last month, but are down this month; in Japan, coal imports have been steady in September through November, according to data by Thomson Reuters Eikon.
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.