From June 24 to 30, China's comprehensive LNG import CIF index was 137.61 points

On July 3, China's 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 index was 137.61 from June 24 to 30, up 7.01% month-on-month and 2.53% year-on-year.

Last week, U.S. natural gas prices fell sharply. On the supply side, the total natural gas production of the 48 contiguous states in the United States rose to more than 100 billion cubic feet per day, down 1.08% year-on-year; According to data released by Baker Hughes on Friday, the number of active natural gas rigs in the latest week was 97, down one from the previous week and 27 from the same period last year. On the demand side, as extreme heat spread in the eastern United States, domestic gas consumption in the United States continued to rise, and residential/commercial gas consumption remained stable, driving total consumption to rise slightly from the previous week, up 7.80% year-on-year. LNG processing across the U.S. has been reduced to approximately 12 billion cubic feet per day due to maintenance at the Sabine Pass, Cameron and Calcasieu Pass export terminals. In addition, according to shipping data provided by Bloomberg Finance, L.P., a total of 29 LNG ships left the United States in the week of June 20 to June 26, with a total LNG carrying capacity of about 105 billion cubic feet. In terms of inventories, according to the relatively lagging data released by the U.S. Energy Information Administration (EIA) last Thursday, weekly inventories increased by 52 billion cubic feet, basically in line with market expectations, compared with the average of the same period in the past five years, the current inventory is up 20.55%, and the fundamentals are relatively loose. In terms of weather, according to the weather forecast of the National Oceanic and Atmospheric Administration (NOAA) last week, the high temperature and heat wave in many states in the United States will continue in the next 1-2 weeks, and the demand for cooling is expected to continue to rise. Throughout the week, although the high temperature is still high, the demand for gas, electricity and refrigeration continues to rise, but there are signs that producers are slowly ramping up production to meet the growing summer demand, and natural gas inventories are still well above normal levels. As of last Friday, the main HH natural gas contract settled at $2.601 per MMBtu, down 8.29% week-on-week.

In Europe, natural gas prices fluctuated in a narrow range. On the supply side, pipeline gas imports from Europe fell last week, pipeline gas imports from Norway fell, and pipeline gas imports from Russia stabilized. LNG imports are stable. On the demand side, consumption in the residential and commercial sectors continued to fall sharply in mainland Northwest Europe last week, while consumption in the industrial and power sectors turned from rising to falling. In terms of inventory, according to the data of the European Natural Gas Infrastructure Information Platform (GIE), the current overall inventory in Europe is 77.62%, and the recent injection rate is relatively stable, and the current total inventory is basically the same as the same period last year, up 0.78% year-on-year. According to the weather forecast, the temperature in northwest Europe will continue to climb in mid-July, boosting some cooling demand. At the same time, the recent high LNG spot prices in Northeast Asia and the intensification of resource competition in the Asian and European markets have provided some support to gas prices in Northwest Europe. However, Slovakia's introduction of an amendment law to protect payments to Russian Gazprom from seizure eased the market's nervousness about the early interruption of Russian pipeline gas, while at the same time, the ban on the transfer of Russian LNG resources outside the zone by some European countries and the continuous and stable injection of gas storage have suppressed the upward trend of price increases, and the price of TTF natural gas futures fluctuated in a narrow range under the combination of long and short. As of last Friday, the main TTF contract settled at 34.480 euros per megawatt hour (about $10.818 per million British thermal hours), down 0.49% week-on-week.

In Northeast Asia, the ongoing heat wave continued to boost downstream demand, with buyers in Southeast Asia and Northeast Asia having spot sourcing demand. Australia's Wheatstone LNG project has been restarted, and the current market supply is relatively sufficient, which has suppressed the room for prices to continue to rise to a certain extent, and the landed price of spot LNG in Northeast Asia has fluctuated in a narrow range with the trend of the Northwest European market. According to data released by the China Natural Gas Information Terminal (E-Gas System), the landed volume of LNG imported by the mainland last calendar week was about 1.63 million tons, 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 imported spot LNG for August was $11.728 per MMBtu, released by the Shanghai Petroleum and Natural Gas Trading Center.

From the perspective of the LNG comprehensive import CIF price index, China's LNG comprehensive import CIF price index was 137.61 points last week, and the index rose. The main reason is that the international crude oil prices in the corresponding pricing period of the China and Long-term Agreements, which account for the vast majority of imports, have begun to rebound. 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 around May, and the spot price fluctuates and rises 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 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 adjusted to be released in the form of an index from September 23, 2020, with the index based on the first calendar week of 2018 (the comprehensive CIF price of China's LNG import in that week was 2,853 yuan/ton, and the price index was 100). It 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