OREANDA-NEWS. Asian LNG demand has become more seasonal because China's programme of installing gas boilers has made the country's consumption increasingly sensitive to changes in the weather.

Asia-Pacific LNG imports totalled 253mn m3 in the 2016-17 winter compared with 204mn m3 in the 2016 summer.

Winter receipts accounted for 55.3pc of total imports over the 2016-17 gas storage year, running from April 2016-March 2017. This share was up from 53.1pc in 2015-16 and 52.3pc in 2014-15.

Northeast Asian LNG prices have already climbed heading into this winter after holding in a steady range less than $1/mn Btu above the TTF for much of the summer.

And Asia's demand growth could be strongest in the winter as Chinese residential heating demand climbs.

China is pushing to switch more customers to gas or electric heating, which is forecast to lift consumption rapidly over the coming years.

Demand had already started increasing more as the weather turned colder last winter. Each 1°C drop in temperature added almost 11mn m3/d to apparent gas demand — not including storage movements — in October 2016-March 2017 compared with about 7.7mn m3/d in the previous two winters.

Consumption from other sectors has also increased, which has raised demand.

The correlation between temperatures and demand in the 2016-17 winter adds about 50mn m3/d to demand over October-March compared with the relationship a year earlier. This assumes temperatures in Beijing in line with the seasonal norm.

 

Chinese production is also seasonal, while pipeline imports are typically higher in the winter months.

But LNG has provided the most supply-side flexibility, climbing sharply during colder periods as well as jumping in the past two years in response to a more general increase in consumption, regardless of the weather.

China's LNG imports were over 150mn m3/d of gas equivalent in December-January, when average temperatures in Beijing were close to 0°C. Deliveries dropped to 114mn m3/d in February, when temperatures were just below 3°C and much lower in October and March when the weather was milder.

November was the outlier, with strong receipts of 122mn m3/d when temperatures were 4.7°C — higher than in February — which may have been driven by stocking up ahead of the coldest part of the winter.

Each 1°C drop in temperature added about 5.3mn m3/d of gas equivalent to monthly LNG imports last winter. Given this correlation, temperatures 1°C below the seasonal norm over the winter would require China to import an extra 280,000m? each month compared with average weather. This is equivalent to almost two standard-sized cargoes.

China would need to import considerably more than expected in the event of cold weather, but could have spare cargoes to offload if temperatures are above average.

Northeast Asian LNG prices for delivery in the coming months have opened a wide premium to the Dutch TTF and UK NBP than contracts for delivery during the 2017 summer.

The ANEA front half-month market also held a wide premium to northwest European hubs for much of last winter.

LNG supply is typically broadly flat throughout the year, although producers often schedule annual maintenance for the low demand autumn and spring periods.

Demand in many major importing countries — including China, Japan and South Korea — usually peaks in the cold winter months. But some gas consumers, such as Egypt, have summer consumption peaks to meet cooling demand.