China's trucked LNG prices drop below $16/MMBtu on weather, ample supply

China's trucked LNG prices have dropped below Yuan 5,500/mt ($1,098/mt), or the equivalent of around $16/MMBtu, in some regions, from around $24/MMBtu a month ago, weighed down by a combination of warmer-than-expected weather, high inventory levels and some slack in downstream demand.

Many LNG terminals and second-tier gas suppliers had prepared sufficient natural gas supplies in anticipation of colder winter conditions and stronger domestic demand, but tighter market conditions have not materialized, forcing sellers to cut trucked LNG prices to reduce inventories, market sources said.

Winter temperatures in the Yangtze River Delta and northern regions in the past 10 days have been about 1-3 degrees Celsius higher than previous years and are expected to remain so in most of the country for the next 10 days, a medium-term forecast by the Central Meteorological Observatory on Dec. 6 showed.

Sinopec Qingdao LNG terminal sold trucked LNG cargoes at around Yuan 5,400/mt Dec. 6, down Yuan 1,100/mt from Dec. 3 prices, sources said. The terminal was facing difficulties in receiving new LNG arrivals due to high inventory, forcing it to cut prices to boost gas sales, a Shandong-based source said.

The move was followed by other LNG terminals in the northern and eastern regions, with PetroChina's Tangshan terminal selling at Yuan 6,000/mt, a drop from the previous week, sources said. Sinopec's Tianjin LNG terminal sold trucked LNG at Yuan 7,400/mt Dec. 6, down Yuan 300/mt from Dec. 3, traders said.

The Shandong-based source said that LNG cargoes unloaded at Sinopec's Qingdao terminal were mostly bought under long-term contracts, which are cheaper than spot LNG cargoes and were mostly unloaded at the Tianjin terminal, explaining why the price drop in Tianjin was less steep.

A Sinopec source confirmed separately that warmer-than-expected weather led to the price drop and their LNG terminals were currently running at full capacity.

In northern China trucked LNG prices were traded at Yuan 5,400-6,000/mt, Yuan 6,000-6,100/mt in the eastern region and Yuan 7,000-7,200/mt in the south on Dec. 6, down by Yuan 700-1,000/mt from Dec 3, according to market sources.

Trucked LNG prices in northern China are lower than pipeline gas which was sold at around Yuan 4.3/cu m, or Yuan 5,930/mt, recently, a second Beijing-based source said. Trucked LNG offered by inland liquefaction plants in northwest China traded around Yuan 5,245/mt Dec. 6, a Yuan 980/mt drop from Dec. 3, data from Chongqing Petroleum and Gas Exchange (CQPGX) showed.

A batch of 28 million cu m of feedstock pipeline gas offered by state-owned PetroChina's northwest branch to LNG plants on CQPGX was auctioned at around Yuan 3.6-5.61/cu m Dec. 3 for delivery over Dec. 6-12, with only 17.69 million cu m awarded on the day, market sources said.

The price was 22% lower than the last auction a week earlier, and equates to around Yuan 5,800-5,815/mt after processing into LNG, adding to the price drop in the region, sources said.

China's LNG plants that process pipeline gas into LNG are mostly concentrated in the northwest where cheaper pipeline gas from domestic sources and imports from Central Asia are available. However, lower prices did not attract much buying interest at the start of the week of Dec 6 as buyers were well-stocked.