SINGAPORE (Reuters) - China’s Sinopec Corp has awarded a 10-year tender to buy 1 million tonnes of liquefied natural gas annually from Qatargas, two industry sources with knowledge of the matter said on Friday, to take advantage of current low prices.
Sinopec has agreed to pay at a slope of 10.19% to Brent crude on a delivered ex-ship basis, said one of the sources.
The deal shows how some buyers are taking advantge of the heavily oversupplied market, with industry sources saying many producers were taking part in the tender.
The Chinese state oil and gas producer issued the tender in July, seeking supplies starting 2023, after prices dropped due to the COVID-19 pandemic hammering global demand for the fuel.
China’s long-term gas demand is expected to grow, supported by the country’s push to shift to the cleaner fuel from coal.
Sinopec and Qatargas did not immediately respond to emailed requests for comment.
The low price slope to Brent crude also shows how persistent Qatar could be in the current market environment. Despite the global oversupply, its exports were slightly higher this year compared with the same period a year ago, Refinitiv data showed, while many other producers have to reduce exports signifcantly.
The slope to Brent means that the price of LNG is calculated as a percentage to a Brent crude contract.
On Friday, the front-month Brent futures price was on course for its biggest weekly decline since June as weak demand figures added to concern over a slow recovery from the COVID-19 pandemic. [O/R]
Reporting by Chen Aizhu in Singapore, additional reporting by Ekaterina Kravtsova in London; Editing by David Goodman and Elaine Hardcastle
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