Three Qatari LNG carriers await Red Sea transit amid escalating conflict: CAS

LNG market participants are closely watching three laden Qatari LNG carriers, scheduled to enter the Red Sea and the Suez Canal for northbound transits, and any change in their shipping routes amid the escalating conflicting in the region could have major implications for Qatar's LNG flows to Europe.

The three laden LNG carriers, namely the Al Nuaman, Al Ghariya and Al Huwaila, slowed their sailing speeds to 1 knot offshore southeast of Oman after loading cargoes and having left Ras Laffan on Jan. 11, according to S&P Global Commodities at Sea.

The moves came to light as yet another Qatari LNG carrier, the Al Rekayyat, has paused in the Red Sea since Jan. 12 having passed the East Port Said along the Suez Canal Jan. 10, according to CAS.

QatarEnergy has yet to respond to an email from S&P Global Commodity Insights which is seeking confirmation as to whether the company was rerouting its ships to avoid the Red Sea.

The number of commercial ships entering the Bab al-Mandab Strait to exit or transit the Red Sea slumped sharply as of early Jan. 12, after major shipping bodies urged operators to avoid the Red Sea for up to 72 hours amid risks of retaliatory attacks by Houthi rebels in Yemen following US-led airstrikes in the evening of Jan. 11.

Important conduit

The Red Sea/Suez Canal is an important conduit for LNG trade flows, connecting the Atlantic Basin with the Pacific Basin. Southbound transits of LNG carriers through the Suez Canal are key to US LNG exports to the west coast of India or Singapore and for ballast vessels returning to Qatar from Europe. In recent months it has also been an alternative to the Panama Canal which has been faced drought related restrictions.

Northbound LNG vessel transits on the Red Sea/Suez Canal are important for Qatari LNG cargo exports to Europe. So far, Qatari cargoes have not been targeted in the ongoing conflict but the situation remains fluid. The voyage time for Middle East LNG cargoes to Southwest Europe is 13 days and to Northwest Europe is 16 days through the Suez Canal; but going around the Cape could take as much as 30 days.

A delay in LNG shipments into Europe would impact port schedules and deliveries into gas storage in the winter season and could disrupt trade flows even though inventories have been healthy this season.

Other trade flow disruptions could emerge if LNG traders seek cargo swaps to sell more Qatari LNG cargoes into Asia-Pacific while routing Atlantic Basin volumes into Europe. A jump in Qatari volumes into Asia-Pacific could further put pressure on prices in the region.