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India LNG Buyers Rethink Spot Purchases After Oil Market Slump

Stephen Stapczynski

(Bloomberg) --

Indian liquefied natural gas buyers, which have helped soak up a global glut, are re-examining their spot buying plans as the collapse in oil prices may make other fuels more attractive.

At least two Indian importers may slow spot LNG purchases amid concerns industrial customers will shift toward oil products, according to traders with knowledge of their plans. A third will likely be able to continue buying LNG unless oil prices stay subdued for six to nine months, the traders said, speaking on the condition their companies aren’t identified.

India’s imports of LNG, which it buys mainly for industrial use, have boomed over the past year as record-low spot prices made it the fuel of choice. But since it also competes against oil products in some sectors, tumbling crude prices are erasing that edge. Oil has fallen about 60% this year as Saudi Arabia and Russia fight for market share and the coronavirus pandemic clobbers demand.

“We expect a downside risk to India’s LNG imports in 2020 due to a large drop in crude prices,” Abhishek Rohatgi, an analyst at BloombergNEF, said by email. “This could make fuel oil cheaper than spot LNG cargoes and reduce demand from industrial users such as the manufacturing sector.”

The shifting fuel preference may mean sellers can no longer count on India to help absorb cargoes after China’s demand was dented by efforts to contain the virus. India imported a record amount of LNG last month, according to Kpler SAS analyst Rebecca Chia.

Indian companies have issued almost 40 tenders this year seeking cargoes for delivery in 2020, according to data compiled by Bloomberg. That’s far more than the eight from all of North Asia, which includes Japan, China and South Korea, where buyers struggled with brimming inventories, weak demand due to a milder winter and Covid-19.

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