QatarEnergy has extended its force majeure on liquefied natural gas (LNG) deliveries to buyers in Asia and Europe into early November. This confirms that shipping disruptions in the Strait of Hormuz, stemming from the ongoing Iran conflict, are far from resolved. This is the second extension of the force majeure since its initial invocation five months ago.
While oil producers in the Persian Gulf, including Qatar, have managed to partially circumvent the Hormuz disruption through ship-to-shuttle transfers, transferring crude to smaller vessels or alternative routes and then onto larger tankers outside the blocked corridor, LNG carriers lack this flexibility. LNG must be maintained at cryogenic temperatures and pressures throughout transit, making mid-route transfers a specialized, slow, and risky operation that cannot be scaled up as an emergency solution. Consequently, Qatar's gas exports remain effectively frozen through Hormuz even as oil flows have partially normalized.
The extended force majeure has significantly impacted global gas markets. Asian and European gas prices have surged, with spot LNG reaching $23.388 per million British thermal units (MMBtu) in Asia and European benchmark natural gas prices exceeding $80 (69 euros) per megawatt-hour (MWh) at the Dutch Title Transfer Facility (TTF). These prices are nearly double their pre-war levels and represent four-year highs for this period. European gas storage facilities are only about 63% full, compared to an average of roughly 80%, exacerbating concerns as winter approaches.
Affected importers, including Italy, Pakistan, and Bangladesh, are drawing down existing storage, purchasing more expensive replacement cargoes on the spot market, and renegotiating delivery windows. This situation is also affecting Qatar's commercial standing, with reports indicating difficulties in securing new long-term LNG supply agreements with major historical buyers like Japan and South Korea, who are now considering more flexible contracts offered by competitors, such as US exporters. Analysts from Rystad Energy and Goldman Sachs anticipate a protracted stalemate, with prices needing to rise further, potentially above 100 EUR/MWh, to manage storage through winter in Europe if Middle East energy exports do not normalize.
