The escalating conflict in the Middle East is delaying LNG shipments via the Strait of Hormuz from key exporters in the region, putting severe upward pressure on spot LNG prices in Asia and the European natural gas market.
The key Strait of Hormuz, where a fifth of global oil and LNG flows pass, is not formally closed. However, major shipping operators and oil and gas companies, and traders have effectively halted shipments through the narrow lane between Iran and Oman.
At least a dozen empty tankers on the eastern side of the Strait of Hormuz have diverted in recent hours, according to vessel-tracking data compiled by Bloomberg.
The delay to LNG shipments from Qatar and the United Arab Emirates (UAE) would see natural gas prices spiking in Europe and Asia.
A month-long halt to LNG exports via the Strait of Hormuz would push Asia’s spot LNG price to jump by 130% to $25 per million British thermal units (MMBtu), Goldman Sachs analysts say.
Qatar, the world’s second-largest LNG exporter after the United States, accounts for about 20% of global supply, all transiting the Strait, according to Kpler data.
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While the risk to LNG shipments hasn’t been as widely broadcast as the risk to oil supply, the risk is real, albeit quieter than the risk to oil.
The risk to gas supply is very real as Israel has curtailed production from its own offshore fields, energy tankers are already disrupted in the Gulf, and Qatar’s position as a transit-dependent LNG exporter creates structural vulnerability, Amena Bakr at Kpler wrote in a Sunday note.
“For gas markets, the real impact will be on European and Asian LNG prices,” ING’s commodities strategists Warren Patterson and Ewa Manthey wrote in a note on Monday.
“While there’s been a ramp-up in LNG export capacity and more to come, particularly from the US, this would not come soon enough to offset potential losses from the Persian Gulf.”
By Tsvetana Paraskova for Oilprice.com
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