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Citing anonymous experts, S&P Global Platts reports, during the early Asian session on Wednesday, mentioned that the latest flare-up between Australia and China has ensnared more commodities but the likelihood of LNG (Liquefied Natural Gas) being impacted is relatively low. Though the analysis doesn’t rule out vulnerabilities stemming from an oversupplied market and China’s growing options for gas imports.

Key quotes

What may fly under the radar is how easy it has become for China to find gas supply alternatives between an oversupplied LNG market, pipeline imports, growing domestic production and slower demand growth.

Iron ore and coal are Australia’s two biggest exports, natural gas is the fourth-largest, with the top ten also comprising gold, aluminum ores, beef and crude oil. A lot of this goes to China.

The contractual nature of LNG trade and energy security concerns protect LNG from being on the receiving end of China’s predilection for using trade to lash out, but market participants aren’t discounting the possibility either, wary of heightened uncertainties due to the pandemic.

FX implications

Following the news, the AUD/USD pair refreshed intraday low to 0.6524 while extending its pullback moves from 10-week top flashed the previous day.