Gas Prices Soar As Iranian Attacks Force Shutdown Of Qata…
Gas prices soar as Iranian attacks force shutdown of Qatari production on x (opens in a new window)
Gas prices soar as Iranian attacks force shutdown of Qatari production on x (opens in a new window)
Malcolm Moore, Andrew England and Rachel Millard in London, William Sandlund in San Francisco
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Iranian attacks on energy sites in the Middle East triggered the biggest rise in natural gas prices since Russia’s full-scale invasion of Ukraine in 2022, raising the threat of a new energy crisis if the conflict drags on.
QatarEnergy, the world’s largest liquefied natural gas company, was targeted with Iranian drone attacks forcing it to shut down production, triggering a surge in gas prices of as much as 50 per cent in European and Asian markets. Saudi Arabia also halted production at a large oil refinery.
Qatar produces a fifth of the world’s LNG production and is the biggest supplier to Asia, triggering a renewed round of competition with Europe for scarce cargoes of the fuel, which have been critical for replacing Russian supplies.
Alarmed analysts in Europe and Asia warned that soaring natural gas prices posed the biggest threat so far to the global economy from the widening Middle East conflict.
“Global gas markets could face a crisis well beyond the scale of oil markets,” said Saul Kavonic, an analyst at MST Financial.
Europe’s gas benchmark, TTF, rose as much as 50 per cent before closing 39 per cent higher at €44.51 per MWh, in the biggest daily percentage move in more than four years.
JKM, the Asian benchmark, was assessed at the equivalent of €43.95 per MWh, a daily rise of 41 per cent.
Prices remain far below the level they reached during the peak of the energy crisis ing Russia’s invasion of Ukraine in 2022, when European gas hit €340 per MWh.
But analysts warned there could be further price increases if the US-launched war is prolonged and Iran attempts further attacks on neighbouring energy infrastructure, with oil and gas supplies from the Gulf already severely curtailed.
“Energy is now clearly in the crosshairs,” said Helima Croft, an analyst at RBC Capital, who said she could see gas prices repeating the levels seen after Russia’s invasion of Ukraine in a prolonged conflict.
The Middle East supplies the world with 120bn cubic metres of gas a year, a volume greater than the sum of Russian pipeline gas that used to flow to Europe. Israel has also shut down two offshore gasfields as a precaution against attacks.
“The drop in Russia gas pipeline supplies in 2022 was around 80bn cubic metres,” said Anne-Sophie Corbeau, at Columbia University’s Center on Global Energy Policy. “This is a bigger volume, but crucially it obviously depends on how long this lasts.”
The price of Brent crude oil rose as much as 13 per cent early on Monday, before falling back to trade over 6 per cent higher at approximately $77.60 a barrel in the New York afternoon.
After firing at tankers in the Arabian Gulf on Sunday, Iran escalated its offensive on Monday, sending waves of drones to target oil refineries and Qatar’s LNG facilities.
The attacks have slowed the flow of oil and gas through the Strait of Hormuz, a narrow chokepoint at the entrance to the Gulf, to a halt.
No LNG carriers have transited through the Strait since Saturday, with 25 at anchor at the entrance and exit of the waterway. With limited storage available, Qatar is unly to restart its LNG production until the flow of ships through the Strait resumes, said analysts.
Such a scenario would unnerve politicians and central bankers. Consumers and investors are still reeling from the inflationary shock that began four years ago, which led to the first prolonged rise in interest rates since the 2008 financial crisis.
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Qatar relies on hydrocarbon sales, primarily LNG, for about 60 per cent of its GDP. Shell, ExxonMobil, TotalEnergies and ConocoPhillips are all investors in Qatar’s LNG facilities.
“A production halt would endanger every region, as QatarEnergy provides critical energy to over 120 countries,” said one person close to Qatar’s decision, adding that there would be a “cascade of economic harm”.
On Monday, Saudi Arabia also shut its giant oil-refining facility of Ras Tanura ing an Iranian attack.
Ali Shihabi, a Saudi commentator close to the royal court, warned it was a “huge escalation”.
“Saudi Arabia, which wanted to stay out of the war, will have to decide how to respond,” Shihabi said.
Iran also claimed to have hit another tanker on Monday, the Athe Nova, near the Strait of Hormuz, and a US-flagged fuel tanker, the Stena Imperative, while it was berthed in the port of Bahrain.
In a sign of investors’ fears over the deepening conflict, the gold price rose and global stocks fell. The Stoxx Europe 600, Europe’s benchmark index, fell 1.7 per cent, led by declines in airlines, hotel groups and carmakers.
In the US — less vulnerable to global energy supply shocks — the S&P 500 and the tech-heavy Nasdaq Composite both fell in early trading but soon pared back all their losses to trade slightly higher.
Gold was up 0.5 per cent to $5,303 a troy ounce, having jumped 2.5 per cent in earlier trading as investors sought haven assets. The dollar rose 1 per cent against a basket of other major currencies.
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