Rising LNG Prices Could Boost Oil Demand – Rystad Energy

Employees work next to liquefied natural gas (LNG) tanks at a plant in Xian, Shaanxi province, China on June 3, 2019. Photo taken on June 3, 2019. REUTERS / Stringer

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LONDON, Sept. 28 (Reuters) – Rising liquefied natural gas (LNG) prices have widened the gap with oil prices and could increase oil demand by an average of 400,000 barrels per day (bpd) over the years. next two quarters, according to a Rystad Energy consultancy study.

The average price of LNG for November delivery in North East Asia was estimated at around $ 26.50 to $ 27 per million metric British thermal units (mmBtu) last week, up about 10% compared to the previous week.

The post-COVID economic recovery in Asia has increased demand and there have been supply issues in some areas.

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Rystad said the LNG rally has broadened the economic incentive to switch from oil to natural gas in power generation.

Asia’s liquid combustion capacity for power generation has declined over the past 10 years, but still stands at around 100 gigawatts (GW), mainly in Japan, Taiwan, Indonesia, Bangladesh and in Pakistan, the consulting firm said.

Asia’s current oil consumption for power generation fluctuates around 900,000 b / d, leaving a monthly unused and available oil combustion capacity of over 550,000 b / d.

As the continent is expected to add 400,000 bpd on average over the next six months, the use of oil combustion infrastructure will increase.

“This is a significant increase for Asia, considering its current use of petroleum for electricity. From a global oil balance perspective as well, this would be a significant change and it supports the current rise in prices. oil prices, “said Claudio Galimberti, senior vice president of the oil markets team at Rystad Energy.

As natural gas prices in Asia are currently forecast to rise and stay well above $ 20 per mmBtu over the coming winter in the northern hemisphere, there is a clear potential for oil demand in this region. – unless the price of oil increases even more rapidly and causes the price to propagate. to LNG to shrink, he added.

Oil markets climbed for a sixth day on Tuesday, boosted by tighter supply and a firm demand outlook, but power shortages in China that affected factory output dampened the recovery.

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Reporting by Nina Chestney; Editing by Susan Fenton

Our standards: Thomson Reuters Trust Principles.


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Felix J. Dixon