Globally staged "gas rush": natural gas has soared several times and the downstream pressure is obvious, "three barrels of oil" is under pressure to ensure supply

Under the influence of many factors, natural gas has become a new commodity "price leader", resources are still in short supply under high prices, and a global "gas scramble" is being staged.

Natural gas, once high-quality and cheap, has recently become the focus of global attention. Against the backdrop of imbalances in supply and demand, natural gas prices have climbed to historical highs, becoming another focus of the surge in commodity prices.

High gas prices bring high costs, and downstream companies are under increasing pressure. With the approaching of September, the traditional peak season for natural gas consumption is also about to begin. According to the current situation, all regions are hurrying to reserve natural gas resources for the winter. It is difficult to significantly alleviate the tight global supply in a short period of time.

The price of gas has risen several times and soars into the sky

For this year's natural gas market, "price increase" is no longer news. However, the recent increase in natural gas and LNG prices has surprised all walks of life.

In the past year, Asian liquefied natural gas prices have soared by nearly 600%; in July, European natural gas prices increased by more than 1,000% from their lowest level in May last year. US natural gas futures prices have risen by more than 50% during the year, and in August they refreshed their highest levels in a decade.

March-August of each year is the traditional off-season in China's natural gas market, with relatively loose domestic and foreign market supply and relatively low prices. However, in the past two years, domestic natural gas consumption has grown rapidly, and the overall market has shown the characteristics of "not weak in the off-season but more prosperous in the peak season". The increase in pipeline gas and domestic gas is limited. Liquefied natural gas (LNG) has effectively made up for the gap in market demand by virtue of its clean and flexible supply characteristics.

According to the Jinlianchuang Price Index, the average national LNG price index in August was 5,482 yuan/ton, an increase of 24.7% month-on-month, and an increase of 111.6% and 70% respectively over last year and August of the previous year.

International gas prices have bottomed out since the end of 2020 and have since risen steadily in shocks. Since the beginning of this year, in the context of global easing, the general rise in commodity prices has caused resonance, which has driven natural gas prices to continue to rise. The price of natural gas has been in a low position for a long time before, coupled with the impact of this year's epidemic, and insufficient investment in upstream exploration and development has also caused the current increase in natural gas supply to be limited and unable to effectively meet the current rapid rise in demand.

Under the combined influence of various factors, the price of natural gas has risen significantly.

In the Chinese market, the advancement of the "dual carbon" process and the continuation of the "coal-to-gas" project in recent years have led to a steady increase in domestic natural gas demand. On a global scale, natural gas, as a relatively clean fossil energy, has gradually increased its share in the energy structure of many countries.

As the northern winter approaches, from Europe to Asia, buyers from all over the world are actively raising resources to make good reserves for winter demand, and a "rush for air" is being staged everywhere.

Downstream pressure increases sharply in winter to maintain supply pressure

In August, China's LNG price fluctuates more frequently than in July, and the overall trend is upward. The continuous increase in import costs and the upstream loss reduction policy are still the main driving forces for the price increase, but the upward trend has shown signs of weakness.

Significantly higher gas prices have put significant pressure on downstream related industries. Under market resistance, LNG consumption has fallen. According to statistics from Jinlianchuang, China's apparent consumption of LNG in August was 4.49 billion cubic meters, a decrease of 3.3% from the previous month and a year-on-year decrease of 16.3%.

According to Sun Xuelian, a natural gas analyst at Jinlianchuang, the sales volume of LNG refueling stations has fallen sharply year-on-year, ranging from 30% to 70%. LNG heavy trucks have even been suspended in some areas, which has also led to a decline in the sales of LNG heavy trucks this year; higher gas prices have driven up costs, and some small and medium-sized enterprises have reduced production or even suspended operations.

This summer, affected by the continued improvement of the economy and the high temperature weather, domestic electricity demand has grown steadily, coal supply has appeared to be tight, and thermal coal prices have also increased simultaneously. In order to ensure the supply of electricity, in addition to reserves of thermal coal resources, power plants in various regions have also invested the hope of ensuring supply to gas power plants. However, the high cost brought about by high natural gas prices has also discouraged many companies.

Wang Ruiqi, a senior natural gas analyst at Jinlianchuang, pointed out to the 21st Century Business Herald that the international spot price of LNG has been rising recently, and the supply of pipeline gas is also tight, pushing the LNG market price to exceed 6000 yuan/ton; for industrial users who use LNG as a gas source and The gas station has a greater impact.

For urban combustion companies, especially those without pipeline gas, the increase in LNG prices has brought greater cost pressure to their operations, and they are relatively passive. "It is destined to be a sad winter." A person in the gas industry sighed.

Zheng Hongtao, president of ENN Natural Gas Co., Ltd., said that in response to the recent increase in LNG prices, the company has locked in low-cost gas sources through long-term contracts linked to oil prices, hedging, and cooperation with domestic unconventional natural gas resource suppliers.

Natural gas inventories in North Asia and Europe will be a key factor affecting natural gas prices in winter.

S&P Global Platts Asia Natural Gas Director Jeffrey Moore pointed out that due to the low level of European inventories, strong demand in Asia and South America, and insufficient supply in other regions except the United States, it is expected that natural gas prices in Asia and Europe will remain low this winter. Will get strong support.

Jinlianchuang analysis pointed out that the current overseas LNG price is still at a high level, and it does not rule out the possibility that winter prices are still at a high level; if there is another cold weather, LNG supply will be very tight.

Bai Hua, a senior economist at the Natural Gas Market Research Institute of PetroChina Economic Research Institute, believes that in recent years, the spread of epidemics and extreme weather and other emergencies have increasingly increased the impact of gas price fluctuations. In the next five years, the supply and demand of the global natural gas market will be generally loose. However, due to the impact of LNG liquefaction project commissioning and project investment delays, short-term supply and demand tightening will occur in the LNG market, and LNG spot prices in Northeast Asia will remain at mid-to-high levels.

After September, as the temperature drops and the northern heating season approaches, domestic natural gas demand will rise simultaneously. For China National Petroleum Corporation, Sinopec, and CNOOC, the main sources of domestic natural gas supply, starting in September each year, they will begin to increase domestic production and supply, coordinate overseas LNG resources, and onshore pipeline gas to ensure domestic natural gas supply. Judging from the situation this year, the pressure to guarantee the supply of the "three barrels of oil" is still huge.

Article source: 21st Century Business Herald