The Chinese energy order foreshadows a more severe gas shortage in Europe.

The natural gas crunch hitting the UK and Europe is likely to intensify after China ordered state-backed companies to secure energy supplies no matter the cost.

Chinese state media quoted Premier Li Keqiang on Thursday as saying the country will secure its energy and power supplies following a series of blackouts and shortages that have forced a large number of companies to restrict output.

Bloomberg reported later in the day that central government officials had ordered state-owned energy companies to secure supplies for this winter at all costs, saying the instruction had come directly from Han Zheng, the vice-premier who oversees the country’s energy sector and industry.

The move by China suggests that other parts of the world will face an even tougher time securing the fuel they need.

Natural gas prices in the UK and continental Europe have hit a series of record highs in recent weeks on the prospect of a shortage of supplies this winter, with Asia’s growing demand for the fuel one of the key factors.

Prices for liquefied natural gas (LNG) cargoes, the main source of competition between Europe and Asia for gas flows, hit a record high on Thursday in Asia of $34.47 per million British Thermal Units as buyers scrambled to secure shipments, with China experiencing widespread power generation problems due to a shortage of coal.

The dramatic surge in the LNG price this year has pushed up UK and European gas prices as the continent tries to attract supplies, but so far buyers in Asia have been prepared to keep paying a premium to lock in cargoes. That has raised the spectre of a bidding war between the two regions, which would boost prices even further.

“It turns out demand for gas is not very sensitive to even extremely high prices — in both markets,” said Laurent Ruseckas at IHS Markit, a consultancy.

Natural gas prices in Europe hit another record on Thursday, with the benchmark contract reaching €97.50 per megawatt hour, before easing slightly. In the UK, the day-ahead price jumped more than 25 per cent to an all-time high of £2.30 per therm. It had traded near 40p a therm in February.

The challenges to Europe’s gas market have been brewing for some time. A prolonged winter drained storage, then the lack of LNG cargoes this summer has meant stocks have not rebuilt to the level the market would like. Lower pipeline supplies from Russia and a sharp drop in domestic output have heightened fears for the winter.

China is facing its own energy crunch because of shortages of coal for power generation, leading it to boost purchases of natural gas at an even faster rate than traders in Europe had been anticipating.

The resulting surge in gas prices around most of the world has fed through into higher electricity costs and pushed rising energy costs to the top of the political agenda, with fears that a cold winter could squeeze supplies to the point where some energy-intensive industries need to restrict production.

Record gas prices have led to the collapse of 10 retail energy suppliers in the UK and led to the government having to intervene to support a fertiliser company that was one of the country’s main sources of CO2, which is essential for food packaging, medical treatment, and nuclear power stations.

China has struggled to boost domestic coal supply to meet increased demand for electricity as its economy revved up after the pandemic because of tough new safety measures introduced after a series of deadly accidents.

In China’s domestic spot market, coal was changing hands at Rmb1,700, or $263 a tonne on Thursday, according to Argus Media, a price reporting agency. European prices, meanwhile, have risen more than $200 a tonne — a level last seen in 2008.

China’s power demand has increased by almost 15 per cent this year, according to Morgan Stanley but its domestic coal supply is up just 5 per cent year-to-date. Coal is still by far the largest source of electricity generation in China.

“Chinese gas purchases are picking up to try and ensure an alternative to coal for heating is available,” said Colin Hamilton, an analyst at BMO Capital Markets.

hello, I am Flora Khan and i work journalist in allnewshouse website i work in other sites like forbes and washington post with 5 years in experience.

Leave A Reply

Your email address will not be published.

Related Posts

Load More Posts Loading...No More Posts.