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Natural Gas Prices Overcomes China

Source: 11/7/2018, Location: Asia

Natural gas prices are surging after a dramatic change to U.S. weather forecasts indicates that winter-like temperatures will grip much of the country in the coming days.

The surprise forecast comes on the heels of a two-month rally that pushed natural gas futures up 12 percent through last week. Prices have lately been trading at highs going back to January as U.S. stockpiles of the fuel sit near the lowest levels in over a decade going into the winter season.

It is known that natural gas prices usually rise before the winter as colder weather leads to higher demand for indoor heating of homes. The total natural gas in stock is currently 3.143 trillion cubic feet, according to the US Energy Information Administration, the lowest level for this time of year in 15 years.

LNG prices could cost Chinese importers, led by major state-owned companies such as PetroChina, Sinopec and CNOOC, a few million dollars more to buy natural gas, according to Wood Mackenzie.

Some speculation and reports suggest that China already has all the supplies needed to meet its needs for liquefied natural gas during the coming winter.

The excess cost and impact on Chinese buyers will be determined by the weather, and the extent to which China's natural gas market needs more supplies this winter, said Wood Mackenzie, director of gas supply research at Wood Mackenzie.

The two major powers in the liquefied natural gas market - the United States as a supplier and China as an importer - are locked in an escalating trade war, prompting Beijing to impose a 10 percent tariff on its imports of US LNG.

While buyers will face high prices, sellers will benefit from this rise and will earn more revenue thanks to China's tariff, which will encourage non-US exporters to raise prices.

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