LONDON (Reuters) - The escalating diplomatic conflict between Qatar and several of its Middle East neighbors has roiled the liquefied natural gas trade, causing at least one tanker to change course and UK gas prices to spike.
Saudi Arabia, the United Arab Emirates, Egypt and others this week severed diplomatic and transport links with Qatar, the world’s biggest LNG producer, accusing it of sponsoring terrorism.
In one of the earliest signs of the effect on the LNG market, Royal Dutch Shell (RDSa.L) sent an LNG cargo from the United States to Dubai, shipping data shows, after the United Arab Emirates banned Qatari ships from entering UAE ports.
A cluster of 17 LNG tankers are now moored off the coast of the Qatari LNG export facility at Ras Laffan, up from seven on Monday.
Gas prices in the United Kingdom spiked on Thursday, with the UK National Balancing Point (NBP) price for July TRGBNBPMN7 up over 4.5 percent after two Qatari tankers that were likely bound for the UK changed course, according to Reuters shipping data.
It is unclear why those tankers shifted movements, though traders said they may be diverted around the continent of Africa rather than transit the Suez Canal, which is where they were expected to go. Traders worry that Egypt might bar tankers carrying Qatari cargoes from using the Suez Canal, though it is bound by international treaties not to block the canal.
Analysts still do not see an interruption in supply in the LNG market, even with Qatar’s role as the world’s largest producer.
“Only Egypt and the UAE are boycotting Qatari cargos so they are the only countries that might see U.S. volume replace Qatari,” said Theodore Michael, senior LNG analyst at energy data provider Genscape in Boulder, Colorado.
Egypt, however, continues to buy LNG from Qatar brought in by Swiss commodity trade houses, like Trafigura, Glencore (GLEN.L) and Vitol, which take ownership of the cargoes at the Qatari port and do not use Qatari ships, analysts and traders said. One source said four tankers were expected to deliver Qatari LNG to Egypt over the next two weeks.
Qatar’s foreign minister, Sheikh Mohammed bin Abdulrahman al-Thani, said the UAE was “exploiting a trading position as a political tool,” noting that about 40 percent of UAE power depends on natural gas from Qatar.
As exclusion zones took effect, Qatar’s fleet of LNG vessels anchored off the UAE’s port in Fujairah prior to the diplomatic cut-off has moved out.
Shell has a deal to supply the Dubai Supply Authority (DUSUP) with LNG which it typically sources from Qatar. But the ban meant it had to source the LNG from elsewhere.
Shell’s Maran Gas Amphipolis tanker, carrying around 163,500 cubic meters of LNG from Cheniere’s Sabine Pass LNG export terminal in Louisiana, was initially headed toward Kuwait’s port of Mina Al-Ahmadi but rerouted Wednesday for Dubai’s port of Jebel Ali.
The tanker is currently unloading at DUSUP’s floating import terminal at Jebel Ali, data showed.
“Shell, as the largest LNG trader, would have a high probability of managing some of this,” said Robert Ineson, managing director, global LNG, at IHS Markit in the Houston area.
“A shutdown of Qatar’s exports, either by pipeline or via LNG, would be highly disruptive to global gas markets. We think this is not likely,” he said.
Eben Burnham-Snyder, spokesman at Cheniere Energy Inc (LNG.A), said earlier this week that the company - currently the only supplier of U.S. LNG - will keep sending cargoes around the world. U.S. cargoes can be rerouted based on market conditions.
Reporting by Oleg Vukmanovic in London; Additional reporting by Tom Finn in Dubai and Scott DiSavino in New York; Writing by Scott DiSavino; Editing by David Gaffen and Leslie Adler