(Yicai) March 3 -- China has ample natural gas inventory and domestic gas demand is moving into the off season, so the impact of the escalating conflict in the Middle East remains manageable, according to analysts.

This month and next mark China’s seasonal downshift from high to lower gas demand, with urban needs easing, said Wang Yafei, an energy analyst at JLC. With ample domestic output and robust supplies from Russia, the closure of the Strait of Hormuz will likely affect China mainly by unsettling near-term market sentiment, said Wang Yafei, an energy analyst at JLC Network Technology.

The key variable to watch is how long the disruption lasts, Wang pointed out.

On Feb. 28, the United States and Israel began airstrikes on Iran, which retaliated and, as of yesterday, announced the closure of the Strait of Hormuz, a 33-kilometer stretch of water between Iran and Oman that is one of the world’s most strategically important crude oil and natural gas transit chokepoints.

As of 5.30 p.m. yesterday, the Platts Japan/Korea Marker -- the benchmark for Asian liquefied natural gas -- stood at around USD13.1 per million British Thermal Units, while Dutch title transfer facility natural gas futures reached EUR39.30 (USD5.70) per megawatt-hour. Both surged more than 20 percent over the course of the day. International oil prices jumped around 8 percent.

“Chinese has abundant natural gas inventories, and any risks from short-term supply disruptions can be mitigated by releasing inventory and using substitute energy sources such as coal, renewables, and pipeline gas imports from Central Asia,” another analyst noted.

Last month, China expanded the scope of value-added tax rebates on imports to include natural gas brought in through approved cross-border pipelines and LNG receiving, storage, and transportation projects. That should help businesses hedge cost pressures during periods of elevated international gas prices, analysts told Yicai at the time.

Given the increasingly complex and volatile global geopolitical and trade environment, Chinese businesses should formulate contingency plans and adjust their strategies promptly in response to evolving domestic and international developments, the analyst added.

Based on the Israel-Iran conflict last June, even if hostilities end quickly, restoring normal shipping operations would take more than two weeks, according to a natural gas analyst at an international energy agency, citing the need for physical mine clearance and the restoration of loading capacity.

Editor: Futura Costaglione