China’s continued LNG inventory drawdowns in April shift spot LNG demand upside to early Q3

China’s LNG inventories continued to decline through April as end users relied on storage to offset short-term supply disruptions amid weak spot import economics. With ex-terminal prices below Asian spot LNG costs, terminals have remained disincentivized to procure spot cargoes, instead monetizing inventories to meet demand. This dynamic is delaying rather than eliminating LNG demand, pushing restocking into early Q3. As inventories fall below seasonal norms ahead of peak summer, China’s supply buffer is tightening, particularly in southern regions where hydropower risks and stronger cooling demand are emerging. We expect a step-up in spot LNG procurement from June–July, creating a bullish skew to Asian LNG prices in early Q3, with upside risks amplified if supply disruptions persist.

Market & Trading Calls

• China LNG Demand: Slight increase, as 2026 demand revised up by 0.2 mt to 63.2 mt, reflecting stronger restocking demand in Q3–Q4. The revision primarily captures a timing shift in demand rather than stronger underlying consumption.
• China implied LNG Inventory: Lower, as inventories continue to decline as storage is used to offset supply disruptions and weak spot arbitrage delays procurement. Effective inventory tightness increases as buffers fall below seasonal norms ahead of summer.
• Asian Spot LNG Prices: Slightly bullish in early Q3, as restocking demand from China is expected to resume from June–July as inventories tighten and cooling demand rises. Price upside is concentrated in early Q3, particularly if supply disruptions persist.

China’s implied LNG inventories declined by 0.6 mt m/m to 6.4 mt (43% full) at end-April, broadly in line with expectations. The drawdown reflects continued reliance on storage to manage short-term supply disruptions, while weak import economics have discouraged spot procurement. With ex-terminal prices below Asian spot LNG costs, terminals have remained incentivized to monetize existing inventories rather than purchase additional cargoes.

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