Gas prices ‘go stratospheric’ as Qatari plant hit by Iran strikes
European gas prices surged on Monday after Iranian retaliatory strikes shut down the world’s largest export plant for liquified natural gas (LNG), based in Qatar.
In a statement, QaterEnergy, the Qatari state energy company, said it had ceased production of LNG due to “military attacks” on Ras Laffan Industrial City and Mesaieed Industrial City.
“One drone targeted a water tank belonging to a power plant in Mesaieed, and the other targeted an energy facility in Ras Laffan Industrial City, belonging to QatarEnergy, without reporting any human casualties,” Qatar’s defence ministry said.
Following the attack, European gas prices surged by over 40 per cent, rising to just under €48/MWh as investors worried about the potential impact on global supply.
“European natural gas prices…[have] gone stratospheric as Qatar just halted LNG production, which signals potentially huge disruption for European energy flows,” said Neil Wilson, investor strategist at Saxo UK.
The pause in production will have a direct impact on Europe, since Qatar supplies around 12 to 14 per cent of the continent’s LNG imports, but the strikes will also force Qatar’s other major buyers to find new sources of LNG.
Qatar exports nearly a quarter of its LNG to China, making it by far its biggest trading partner, while India and South Korea are also major buyers.
“A tighter market would see Asia and Europe competing more aggressively for LNG cargoes, pushing up prices,” analysts at ING said.
“If LNG markets start pricing in extended losses to Qatari supply, TTF could spike toward €80-100/MWh,” they warned. TTF is Europe’s benchmark LNG price.
Hormuz Strait fears drive up prices
The strikes on Qatar came after the US and Israel launched a bombing campaign against Iran over the weekend, killing the Supreme Leader Ayatollah Khamenei.
Iran has responded with drone strikes across the region, targeting US military bases, Israeli cities, and important civil infrastructure. On Monday, Iranian drones hit the Ras Tanura oil refinery in Saudi Arabia, the largest in the Gulf.
This attack, along with fears about potential disruption to the Strait of Hormuz, pushed up oil prices significantly. Roughly 20 per cent of global oil production passes through the Strait of Hormuz, making it one of the most critical arteries in the global economy.
The Iranian Revolutionary Guard has warned ships not to pass through the Strait, and claims that it has destroyed three tankers, from the US and the UK. Shipping through the narrow sea lane has come to a near total standstill.
The price for a barrel of Brent oil rose 8.7 per cent on Monday to trade at $79, with some analysts predicting it could surpass $100. The ING analysts said that “even partial disruption” to the Strait could produce a “supply shock of historic proportions”.