China has boosted underground storage of natural gas, after it made an early start on preparations for peak demand over the winter. 

But the build-up may also signal subdued consumption in recent months due to a slowing economy, which has left the country uncommonly well-stocked with the fuel. If the winter’s bitter, then China will surely be glad of its hoard. But mild weather could have implications for imports, especially the more expensive spot purchases of liquefied natural gas.

Beijing has a particular sensitivity around power and heating supplies after enduring shortages in recent years. Gas is also heavily keyed to geopolitical conditions, shown by the spike in international prices that followed the invasion of Ukraine, which creates an additional incentive to secure supplies. 

The government doesn’t publish nationwide figures on inventory, but recent releases from major storage hubs indicate that increased volumes have been injected into the subterranean caverns that supply its cities. Those caves are also getting bigger as old oil wells are repurposed to house more of the cleaner-burning fuel.

Gas injections in China typically run from April through September, to meet withdrawals over the colder months when the fuel is most needed. The Huabei site, which serves Beijing, had stored 2 billion cubic meters by the end of August, according to the Shanghai Petroleum and Natural Gas Exchange. 

That’s 83% of the facility’s annual target, and equal to last year’s injections with still a month to go. The site has doubled in volume over the past six years and will be expanded again this winter. China’s largest storage facility at Hutubi in Xinjiang’s gas fields in western China, and the Dagang facility in the northern port of Tianjin, have also seen a rapid pace of injections to record levels this year, according to local media.  

China’s rising domestic output and imports of gas since the end of the pandemic have coincided with a lackluster economy, which has curbed demand for the fuel. It’s a similar picture across Chinese commodities markets, where stockpiles of items from iron ore to soybean meal are brimming over because of excess supply. The nation’s abiding reliance on coal and the rapid adoption of renewables are other threats to gas’s place in the energy mix.

Seaborne LNG accounts for about 60% of China’s gas, with the rest arriving overland via pipelines from Russia and Central Asia. Most LNG is secured on long-term contracts from mega-projects in places like Australia, Qatar and the US.

The dearest source of the fuel is the LNG bought on a spot basis to top up requirements. It’s that which is most at risk from a well-supplied Chinese market over the winter. LNG imports have already slipped in recent months, and buyers have put spot purchases on hold after Asian rates jumped in August, ENN Energy Holdings Ltd. said in a note last week. 

On the Wire

Japanese companies are increasingly abandoning an approach to business in China that once seemed immune to politics, a stark shift after years when they were the biggest single investors in their neighbor’s economy.

US and Chinese negotiators discussed shared goals of stemming deforestation and paring potent planet-warming pollution during three days of talks in Beijing.

The oil party isn’t over yet — but for top merchants and executives gathering for talks and rooftop cocktails in Singapore this week, the exuberance that came with the outsized profits of recent years is quickly fading. 

China’s central bank did not add any gold to its reserves for a fourth straight month in August as prices for the precious metal rose to a record.