The supply of LNG (liquefied natural gas) from the Middle East has significantly decreased following the war in Iran and the resulting restrictions in the Strait of Hormuz. Since March, only a few LNG shipments have been able to pass through this critical point, where before the war, one-fifth of the global LNG supply was transported from.
Rising Prices in Global Markets
This reduction in supply has had profound effects on the global gas market. Spot LNG prices in Asia and benchmark natural gas prices in Europe have reached their highest levels in 2023. Price-sensitive buyers in Asia are under pressure, and concerns in Europe have increased as winter approaches, with gas storage volumes at their lowest level since 2011.
Read more: The Ministry of Oil has announced a new pricing formula for feedstock and petroleum products
Challenges in LNG Supply
Qatar's LNG exports are nowhere near the level and speed of crude oil exports returning from the Middle East. Most LNG vessels are unofficially passing through the Strait of Hormuz, making their tracking more difficult and impacting estimates related to flows and global supply balance. In recent weeks, Qatari and Emirati shipments have successfully passed through the Strait of Hormuz, but the volumes are so low that they cannot impact the global LNG balance.
Additionally, damages to gas facilities in Ras Laffan in March have reduced LNG production capacity. Two units from the world's largest liquefaction complexes have been damaged, and their repairs will take three years. QatarEnergy, the state-owned energy giant of the country, has recently extended the force majeure deadline for LNG deliveries to Asia and Europe until the end of November.
Given this situation, LNG demand in key South Asian countries such as Pakistan and India has decreased due to high prices and dependence on Qatari supply. LNG demand in these regions is expected to be significantly affected, and the overall outlook for the LNG market in the coming years is expected to decline considerably.
Read more: Sale of Suezmax Stella by CMB.TECH NV with a profit of $59.6 million · Pakistan faces $1 billion cost to secure LNG gas in winter
