Qatar extends LNG force majeure as Asian and European gas prices rise

Natural gas prices in Asia and Europe rose on Friday following reports that Qatar has extended its force majeure declaration on liquefied natural gas deliveries. The extension, which covers the period through October and early November, has intensified concerns regarding global supply levels ahead of the winter season. This development comes amid continued blockages to transit through the Strait of Hormuz, which remain a critical bottleneck for energy exports from the region.

In Asian markets, the spot LNG price climbed to $23.388 per million British thermal units on Friday, according to traders speaking to Bloomberg. This level represents a four-year high, a trend that has persisted throughout the week as supply conditions have tightened. The absence of Qatari term deliveries since the onset of the Iran conflict has significantly reduced available volumes. Furthermore, Asian utilities have been outbidding European buyers for LNG supply during the summer months. This competitive pressure has arisen because the pool of Middle Eastern cargoes has shrunk, and other producers have been unable to fully compensate for the lost volumes with increased deliveries.

European markets experienced a similar surge, with LNG prices reaching their highest levels since 2023. The benchmark natural gas price at the Dutch Title Transfer Facility rose by two percent in morning trade in Amsterdam, surpassing $80, or 69 euros, per megawatt-hour. This price increase is occurring against a backdrop of low storage levels. As of this week, European gas storage sites are only 63 percent full, a figure that stands well below the five-year average of approximately 80 percent. The combination of elevated demand for filling depleted storage and generating electricity during summer heatwaves, coupled with the reduction in LNG supply, has driven benchmark prices to three-year highs.

The logistical challenges facing LNG are distinct from those affecting crude oil. While oil flows through the Strait of Hormuz have estimated to have rebounded in recent weeks, LNG traffic remains at a standstill. Unlike crude oil, liquefied natural gas cannot be shuttle-shipped through the strait and subsequently re-loaded via ship-to-ship transfers. This method has been employed by Persian Gulf producers in recent months to ship oil to customers, but it is not a viable option for LNG cargoes. Consequently, the extension of the force majeure by QatarEnergy, the state-owned entity, has further heightened anxiety over the stability of global LNG supply chains as the winter period approaches.