SunSirs: International Situation Disturbance Combined with Spot Rebound, China LNG Market Enters a Period of Volatile Recovery

This week, the domestic LNG market has shown characteristics of "macro sentiment dominance and intensified game play". The benchmark price of SunSirs rose from 5176 RMB/ton at the beginning of the week to 5,400 RMB/ton, an increase of 4.3%.

This rise is not solely driven by domestic supply and demand, but is the result of the combined effect of improved international geopolitical expectations and supply side disruptions. Despite signs of easing in the Strait of Hormuz, the fragility of the global supply chain still exists; After experiencing a deep pullback in the early stage, the domestic market confirmed a temporary bottom with the signal of "negative narrowing of the mean difference" on a technical level. However, the phenomenon of heavy vehicles dumping goods in some areas indicates that the current rebound foundation is not yet solid, and the market has entered a critical window period of shock recovery.

International situation: coexistence of geopolitical games and supply chain vulnerabilities

The current trend of domestic LNG prices is highly linked to the international market, and this week's rebound is mainly driven by the following international macro factors:

1. The situation in the Strait of Hormuz: risk premium has subsided but hidden dangers have not been eliminated

Recently, there has been progress in communication between Iran and Oman, and tensions between the United States and Iran have eased. A small number of cargo ships have resumed passage through the Strait of Hormuz. This positive signal effectively eased the market's panic about energy transportation disruptions, leading to downward pressure on international gas prices that were previously pushed up by safe haven demand.

Although the situation is improving, it will still take time for the strait to fully resume normal passage, and geopolitical uncertainty has not been fundamentally eliminated. This "semi connected" state makes the international LNG trade flow still fragile, and any sudden news may trigger price fluctuations again, which can then be transmitted to the domestic market through import costs.

2. Structural tightening and cost support on the global supply side

During the critical stocking period leading up to the peak summer gas demand in the Northern Hemisphere, some large liquefaction terminals in Australia and the United States have entered their annual maintenance window, and some production areas have experienced brief supply interruptions due to equipment failures. This supply side contraction provides bottom support for international gas prices, offsetting some of the price pressure brought about by the easing geopolitical situation.

International crude oil prices have remained high and volatile this week, providing a cost bottom line for gas prices as an alternative energy source linked to natural gas. Meanwhile, exchange rate fluctuations have led to an increase in the cost of imported LNG denominated in US dollars when converted to Chinese RMB, further compressing the price reduction space for domestic receiving stations.

3. Market microstructure: Heavy vehicle dumping reveals divergence

On August 3rd, there was a turning point in the LNG market prices in some regions, with the area of price reduction exceeding the area of price increase, and some heavy LNG vehicles experienced a phenomenon of cargo dumping. This detail is crucial as it indicates that after a rapid price increase, some traders and logistics providers choose to take profits or stop loss and exit, exacerbating the market's long short divergence.

On August 4th, Shaanxi extended the collective price increase of LNG by 40-80 RMB/ton, indicating that upstream liquid plants still have the willingness to raise prices under cost support. But whether this localized price increase can continue depends on the downstream willingness to receive goods and the stability of overall market sentiment. If the phenomenon of heavy vehicles dumping goods spreads, it may suppress further upward space for prices.

Future prospects and suggestions

Overall, the rebound in the LNG market this week is the result of the combined effect of the easing of international geopolitical situation and the repair of domestic technical oversold. However, the uncertainty of the situation in the Strait of Hormuz, the structural tightening of the global supply side, and the selling pressure in local domestic markets all indicate that the future trend will be full of variables.

Short term: It is expected that the price of LNG will fluctuate and consolidate within the range of 5,300-5,500 RMB/ton. It is necessary to closely monitor the navigation situation in the Strait of Hormuz and whether the phenomenon of heavy truck dumping in China has eased. If the average deviation indicator successfully turns positive and expands, it is expected to start a new round of upward trend; On the contrary, if the selling pressure continues, the price may fall back to the support level of 5,200 RMB/ton.

Medium to long term: With the arrival of the peak summer gas consumption in the Northern Hemisphere, global demand for LNG will gradually rebound. If the geopolitical situation remains stable and supply side maintenance is completed, the market is expected to return to fundamental driving, and prices may show a moderate upward trend. It is recommended that traders remain cautious and optimistic, avoid chasing high prices, and focus on inventory management and risk control.

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