From October 30 to November 5, China's comprehensive LNG import CIF price index was 156.45 points

On November 8, the China LNG comprehensive import CIF price index jointly released by the Global Trade Monitoring and Analysis Center of the General Administration of Customs and the Shanghai Petroleum and Natural Gas Trading Center showed that China's LNG comprehensive import CIF price index from October 30 to November 5 was 156.45, up 12.59% month-on-month and down 18.82% year-on-year.

Last week, U.S. natural gas prices fluctuated at high levels. On the supply side, the total weekly production of natural gas in the 48 contiguous states of the United States stabilized at more than 102 billion cubic feet per day, up 0.89% year-on-year. According to data released by Baker Hughes on Friday, the number of active natural gas rigs in the latest week was 118, an increase of one from the previous week and a decrease of 37 from the same period last year. On the demand side, with the winter heating season approaching, residential/commercial gas consumption in the United States rebounded sharply last week, while power generation gas consumption rose slightly, making total consumption rise sharply, far exceeding the level of the same period last year, with a year-on-year increase of 18.80%. Freeport and other LNG projects are running steadily, with LNG processing across the U.S. stabilizing at more than 13 billion cubic feet per day, a high level above the same period last year, and Reuters reported Nov. 1 citing LSEG, LSEG, that U.S. LNG exports reached 7.92 million mt in October, the highest since April this year. In terms of inventories, according to relatively lagging data released by the U.S. Energy Information Administration (EIA) last Thursday, weekly inventories increased by 79 billion cubic feet, basically in line with market expectations, compared with the average of the same period in the past five years, inventories increased by 5.74%, and the fundamentals are relatively loose. In terms of weather, last week's National Oceanic and Atmospheric Administration (NOAA) weather forecast showed that the weather in most of the 48 contiguous states in the United States will be milder than normal in the next 1-2 weeks. U.S. natural gas production remained high last week, and inventory data released on Thursday showed that the weekly inventory level was basically in line with market expectations, and weather forecasts showed that the weather may warm up in the near future, but the market is worried about the instability of resource supply in winter. Under the combination of bulls and bears, U.S. natural gas prices fluctuated in a wide range at recent highs. As of Friday, the main NYMEX natural gas contract settled at $3.515 per MMBtu, down 0.92% week-on-week.

In Europe, natural gas prices fell. On the supply side, pipeline gas imports from Europe rose slightly from the previous week last week, from Norway to Norway, from Russia to be relatively stable, and LNG imports were basically unchanged from the previous week. On the demand side, the weather in many countries has been mild recently, heating and industry-related demand fluctuated in a narrow range, power generation and refrigeration-related demand was relatively stable, and the overall demand was average. In terms of inventories, according to data from the European Gas Infrastructure Information Platform (GIE), the overall inventory in Europe is now 99.62%. According to the latest weather forecasts, temperatures are stable in most parts of Europe in the next 1-2 weeks. Inventories in Europe are now close to full, and the recent mild weather has led to an increase in wind power generation due to strong storms in many countries, which may not be able to boost natural gas-related demand before winter. Although the situation in the Middle East is unpredictable, the US government announced that it will impose sanctions on the Russian Arctic 2 LNG project, and the supply-side tension still exists, but it is difficult to hide the current weak fundamentals, and European natural gas prices continue to decline. As of last Friday, the main TTF contract settled at 48.057 euros per megawatt hour (about $15.073 per million British thermal hours), down 9.38% week-on-week.

In Northeast Asia, the inventories of China, Japan and South Korea remained at a high level, and the interest of traders in the region in purchasing spot resources was flat, and the supply of spot resources in winter was relatively sufficient. However, the instability in the Middle East still affected market sentiment and drove the spot CIF price of Northeast Asia LNG back above the $18/MMBtu mark last Monday, but in the following trading days, the spot CIF price of LNG in Northeast Asia fluctuated to around $16/MMBtu due to weak fundamentals. According to data released by the China Natural Gas Information Terminal (E-Gas System), the mainland's LNG imports landed about 2.01 million tons last calendar week, a sharp increase. According to the monitoring of the trading center, the current turnover of mainland enterprises in the physical market is not large, and the price in the international spot market at this stage does not fully represent the real overall LNG import cost of mainland enterprises. Thanks to a large number of medium and long-term LNG purchase and sales agreements signed by importers, including the three major oil companies, and a large number of imported pipeline gas, the demand for spot LNG imports in the mainland has increased relatively little at this stage, so the international spot price level has little impact on the overall natural gas market in the mainland. As of Tuesday, the CIF price of China's spot LNG imports for December was $14.962 per MMBtu, assessed by the Shanghai Petroleum and Natural Gas Exchange.

From the perspective of the LNG comprehensive import CIF price index, China's LNG comprehensive import CIF price index was 156.45 points last week, and the index has risen significantly recently. The main reason is that the international crude oil prices in the corresponding pricing period, which accounts for the vast majority of imports, continue to rise. For a small part of the import spot, due to the pricing cycle, the pricing cycle of the spot part of the current CIF price index is mainly in September, and the spot price fluctuates less during this time period. Under the comprehensive impact, the CIF price of LNG imports has risen.

The compilation of China's LNG comprehensive import CIF price index was jointly completed by the Global Trade Monitoring and Analysis Center of the General Administration of Customs and the Shanghai Petroleum and Natural Gas Trading Center, which was first published on October 16, 2019 and released in the form of price, and has been adjusted to be released in the form of an index since September 23, 2020, which is based on the first calendar week of 2018 (the consolidated CIF price of China's LNG import in that week was 2,853 yuan/ tonnes, the price index is 100), which comprehensively reflects the price level of LNG imports from mainland China last week. This is a useful exploration of the market-oriented pricing system of natural gas prices in the mainland, which is conducive to cultivating domestic natural gas pricing benchmarks, timely and effective docking between the domestic market and the international market, and further enhancing the influence of the mainland in the international oil and gas market.

Source of this article | Shanghai Petroleum and Natural Gas Trading Center

The author of this article | Chan Ying-ho