China Orders Top Energy Firms to Secure Supplies at All Cost
Oil futures erased earlier losses in New York. West Texas Intermediate crude climbed as much as 1.4% to $75.84 a barrel on Nymex. Natural gas futures in New York extended gains, and shares of U.S. gas exporter Cheniere Energy Inc. rose. Chinese coal futures earlier surged to a record as the country grapples with shortages of the fuel ahead of a week-long holiday. Prices have more than doubled this year amid soaring electricity demand from factories and slow output growth from mines.
The emergency meeting underscores the critical situation in China. A severe energy crisis has gripped the country, and several regions have had to curtail power to the industrial sector, while some residential areas have even faced sudden blackouts. China’s power crunch is unleashing turmoil in the global commodities markets, fueling rallies in everything from fertilizer to silicon.
Calls to the state council went unanswered outside business hours.
Volatility in the energy markets is poised to intensify on the order from the central government, said Bjarne Schieldrop, chief commodities analyst at SEB.
China’s statement “to me implies that we are in no way on a verge of a cool-off. Rather it looks like it is going get even more crazy,” he said. “They will bid whatever it takes to win a bidding war for a cargo of coal” or liquefied natural gas.
In a sign of how worried Chinese officials are, Premier Li Keqiang has vowed that every effort will be taken to maintain economic growth. China will ensure the needs of basic livelihoods are met and will keep industrial and supply chains stable, Li was cited as saying by China National radio during a meeting with foreign diplomats Thursday.
China’s move “brings security of supply back on the forefront,” said Leslie Palti-Guzman, president of New York-based consultancy Gas Vista LLC. “This is bad news for European governments and consumers who will deal with elevated gas and electricity prices for the rest of the winter” as they compete with China for supply.