Natural gas war is next after oil

Chinese LNG imports gained 12% year on year to reach 1.5 million metric ton in April, as per customs data. This was the largest increase in volumes since November 2014. Import is also up 15% from March when China imported about 1.3 million metric ton.

Similarly pipeline based natural gas consumption has also gone up by 18% from a year ago to 2.14 million metric ton.

Average LNG price paid was $8.15/mmbtu according to Platt's calculation, which is 25% lower than a year ago.

Natural gas Arbitrage -

Theoretical large scale physical arbitrage exists since average price China imported was at$8.15/mmbtu and in US natural gas is trading about $2.8/mmbtu. China imported LNG from Qatar at $13/mmbtu.

US exports of Natural gas is increasing and US department of Energy (DOE) will approve more projects to export LNG.

Market structure is changing -

Investments on natural gas is going up across globe. Australian companies are investing in projects and natural gas is expected to contribute about 11% of country's export volumes from current 6%.

Import patter in China shows that market is moving towards lower prices.

China has increased LNG purchase from Malaysia by almost 200% as country price plummeted to $7.3/mmbtu, down 12% from a year ago.

On the other hand China reduced LNG purchase from Qatar by 77%, where price was about $13/mmbtu.

Over the next few quarters expect natural gas arbitrage to get reduced and consumption of Natural gas to go up across the world.

Price of natural gas in US might go up from current $2.87/mmbtu.