LONDON (Reuters) - Gas exporting giant Qatar has all but sold out of winter supply after committing its spare output to China and South Korea, a development that could tighten Asia’s gas markets as the peak demand season bites.
Doha’s bumper sales will also ring alarm bells for other regions reliant on Qatari liquefied natural gas (LNG) such as Europe and may further boost Asian spot prices, which have already surged 55 percent since September, traders said.
Despite widespread forecasts of an LNG glut, China’s shift to gas this year as it moved millions of households away from coal to combat smog has lifted its LNG imports by 43 percent and squeezed global gas markets.
But some traders are split on the sustainability of the rally, citing weather, crude oil price movements and the degree of residual demand left in China as big unknowns that could potentially dampen prices.
Normally Qatar plays the role of swing supplier to global LNG markets, churning out cargoes to cover demand spikes.
This time, Asian markets face a knife-edge balancing act as state-run Qatargas - catering to China, Japan and Europe - is booked out until April while peer Rasgas - covering South Korea, Taiwan and India - holds just a handful of free cargoes in February and March, trade sources and analysts said.
“If the winter is harsh then Asia will have to pay up to secure supplies and with new projects in Russia and the U.S. too delayed to provide much relief, prices will rise again,” a senior LNG analyst at a major provider said.
Qatargas, in the process of absorbing Rasgas to create a single Qatari LNG player, did not reply to requests for comment.
A large part of China’s surplus demand was filled by Qatar through fresh sales and even tweaks to existing long-contracts, according to trade sources and customs data.
The producer shipped 600 percent more LNG to China in May from a year ago, 77 percent more in June, 400 percent more in July, 150 percent more in August and 215 percent more in September. [O/CHINA7]
That trend should continue through the winter, traders said, as the Gulf state adapts to long-term buyers’ needs to hold on to its share of the prized Asian market.
Qatar also found buyers beyond China as rising coal and crude oil prices and nuclear supply shortfalls propped up spot LNG demand in India, Taiwan and South Korea, further emptying its shelves.
Qatar’s absence from spot markets may be felt in higher LNG prices which some traders predict may hit three-year highs above $11 per million British thermal units (mmBtu) this winter, from $9.40 per mmBtu currently.
The shift in sentiment has bulls wondering whether forecasts of global LNG markets re-balancing in the early 2020s may not be wide of the mark given the quickening pace of Chinese consumption growth.
Bears urge caution, however, ahead of the imminent start-up of new liquefaction plants in the United States, Russia and Australia and the alternatives to LNG that Beijing has on offer.
For example, China’s piped gas imports from Central Asia and Myanmar soared to a record 3.4 million tonnes in September, the latest month for which data is available and well ahead of the 2.5 million tonnes shipped in by tanker.
PetroChina is also near the limit on how much more LNG it can bring into its fully booked import terminals this winter, though peer CNOOC has room for maneuver, fuelling trader speculation of potential gas swaps if shortfalls emerge.
“My personal view is that China will remain quiet as they have already contracted the LNG they need,” a trader said.
Reporting by Oleg Vukmanovic; Editing by Veronica Brown and David Evans