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China is increasing its imports of liquefied natural gas for the winter, aggravating a global supply crisis and leaving less fuel for Europe’s energy-starved consumers. China is trying to get enough coal to power industries and heat households this winter, as the world’s second-largest economy faces a potential energy-crisis situation comparable to Europe’s disarray. As a result, some of the country’s energy behemoths, such as state-owned Sinopec (NYSE: SHI), have returned to the LNG spot market, seeking shipments of the heating fuel in anticipation for when temperatures drop.
Natural gas prices have risen to seasonal highs from Europe to Asia as the post-pandemic recovery collides with supply limits. China’s voracious hunger for LNG to drive its economic recovery has already stressed the situation; the country is on track to overtake Japan as the world’s largest importer of the fuel this year.
Many of China’s LNG customers, who are among the world’s largest, had temporarily halted spot buying when prices began to rise over the summer. Traders were betting on a drop in spot rates. However, this has not occurred, and firms are again returning to the game. On Tuesday, Sinopec, the Chinese oil and gas company, released a tender for the purchase of at least 11 LNG cargoes until March. This is the largest winter purchase request from a Chinese company in recent months. Smaller importers, such as Beijing Gas Group Co. and Guangzhou Gas Group Co., are also interested in purchasing supplies in October and November. The Chinese oil giant Sinopec was a frequent bidder of excess cargo in tenders last winter. Other purchasers in Asia may be alarmed by their return to the spot market, which might lead to panic buying as competitors try to acquire supply before prices rise even more.