FX.co ★ China benefits from US gas supplies

China has unexpectedly benefited from a trade deal, according to which Beijing is committed to purchasing a certain amount of natural gas from Washington. When the agreement was signed, gas supplies from the US appeared to be a burden. However, during today's energy crisis, it is a good bargain.

Agreements for the supply of US gas were reached in 2019. At that moment, it seemed like a US victory in the trade war with the PRC. However, during the energy crisis, this deal now looks like Beijing's trump card. US companies cannot default on their supply commitments as this would threaten them with multi-million dollar lawsuits. Thus, not only the US but also Australia and Qatar will supply China with liquefied natural gas. The gas carriers, returning to terminals in Australia, Qatar, and the US at the beginning of October, will only be able to sail to Europe if the Chinese do not offer a higher price once again.

The European strategy of energy diversification triggered an energy crisis. Instead of relying on pipeline gas from Russia, EU countries and the UK have tried to use green technology and liquefied gas. However, the climate has dashed the countries' hopes of wind generation, and China's LNG deals with the US have provoked a shortage of fuel in the EU in the amount of 20 billion cubic meters.