Qatar’s diplomatic crisis with its Middle Eastern neighbors could spur natural gas buyers to seek greater diversification in sourcing amid potential disruptions from United Arab Emirates ports refusing ships from the country.
“Buyers will increasingly look to complement their contract-dominated import portfolio with more spot purchases, although these will be smaller in volume,” said Peter Lee, BMI Research’s oil and gas analyst.
Qatar is the world’s largest producer and exporter of LNG, which is traditionally sold on long-term contracts spanning decades. Large buyers include Japan, South Korea and China, who in March banded together to secure more flexible supply contracts.
LNG buyers have already been increasing spot natural gas purchases since prices in the commodities complex crashed following crude oil’s 2014 slump.
Yet despite concerns about disruptions to crucial supplies, the market is currently calm. Reports indicate, meanwhile, that Qatari ships passing through the key Suez Canal shipping route are not facing restrictions as it is an international water passageway.
Despite earlier concerns, gas shipments are also passing through the Strait of Hormuz between Oman and Iran before moving onto Asia.
What buyers may actually be more concerned about now is the chance of logistical hitches.
The diplomatic rift has hit gas tankers stopping at the port of Fujairah, a fuel hub, with ships sent to find new destinations as far as Singapore for the task, trade media report, potentially causing delays and adding to shipping cost.