in line with normal range
Growing focus on Iran’s Hormuz Strait
closure rhetoric
Over 80% of Qatari LNG goes to Asia but
highly relevant for Europe
LONDON (ICIS)–LNG production from Qatar and
the UAE – the two countries that sit the other
side of the Strait of Hormuz from global buyers
– continues as normal, according to ICIS data.
Disruption to shipping signals is making the
accurate tracking of LNG vessels harder, and
more ballast Qatari vessels are waiting east of
Hormuz than normal before going to Ras Laffan
to load.
ICIS data on Monday 23 June showed that 43
vessels had loaded from Ras Laffan in the last
15 days, unchanged from the same period last
year.
This is down by one from the previous 15-day
period, but this is not an unusual deviation
given the scale of 77.4mtpa production.
A total of four cargoes loaded from the UAE’s
Das Island over the past 15 days, up by one
from last year, down by one from the previous
15 days, according to ICIS data.
ICIS analysts have observed a number of vessels
near Qatar registering false positions via
their AIS signal data.
But ICIS identified the laden 138,000cbm
Disha
as having crossed Hormuz east on Sunday 22
June, as well as the 152,000cbm Al
Areesh and the 174,000cbm Al
Sakhamah.
The 138,000cbm Raahi
appears to have crossed west in ballast on 23
June.
KEY LNG TRADE FLOWS
spot prices have moved up since early June due
to growing security concerns in the Middle
East, and are back to the highest levels since
February.
While the TTF now reacts immediately to major
geo-political news given the depth of market
participants, liquidity, and Europe’s
dependency on LNG imports, East Asian spot LNG
pricing remains less liquid, and highly
influenced by the European market.
That said, the ICIS East Asia Index remains at
a volatile premium to the TTF, despite limited
new LNG demand signals from Asian buyers.
Since the start of 2024, 82% of Qatari LNG has
gone to Asian markets, according to ICIS data,
with Europe now accounting for a much smaller
share.
Rising US LNG production has stepped in to
dominate Europe’s LNG supply.
The UK, for example, now imports much more from
the US than it does from Qatar.
Major LNG buyers continue to analyse potential
risks to current supply from the Middle East
situation, and are well aware of the impact
even a small reduction in Qatari deliveries
would have.
While this would hit Asian buyers most
directly, it would also impact European markets
if higher Asian spot prices pulled US LNG away
from Europe.
BULLISH PRICES
An Asian price premium of up to $0.50/MMBtu to
the TTF – typical of the last month – would
likely mean sufficient US LNG flows to both
Europe and Asia to cover demand and reflects a
reasonably well-balanced market.
In the event of a cut in supply to Asia, the
EAX would rise, taking the TTF with it given
Europe’s dependency on LNG.
The Asian premium to TTF would likely need to
rise to at least $2/MMBtu to pull much larger
volumes of US LNG away from Europe.
Further TTF price rises would filter through
across European energy markets.
In Asia, most LNG is still sold on an oil price
link which is currently well below spot prices
– although oil prices would naturally also be
impacted by Hormuz disruption.
It is unlikely, however, that outright gas and
LNG prices would substantially deviate between
the two regions as both would compete for
cargoes.
Higher spot LNG prices would also dent demand
from many Asian buyers.
Any extended closure of Hormuz appears highly
unlikely given likely pressure that would come
from major economic and military powers against
Iran.
But even short-term disruption could lift LNG
and gas prices and lead to significant
scrambling from sellers and buyers needing to
use all available optimization and risk
management tools at their disposal.
Alex Froley contributed to this story