There geopolitical situation in the Middle East remained uncertainboth for the evolution of the conflict between Israel and Hamas in Gaza, and for the Houthi attacks of Yemen against commercial ships transiting the Red Sea. This second fact, for a month now, has been having a serious effect on global trade, with the cost of shipping between Asia and Europe skyrocketing, as most shipping companies have rescheduled trips to avoid the Sea Red and instead pass around the Cape of Good Hope. This could have an impact on both the cost of goods transported and that of energy, as theEurope has become more dependent on liquefied natural gas (LNG) deliveriesafter the war in Ukraine and the resulting energy crisis forced a change in the energy mix of the Old Continent.
LNG shipments are slow to arrive
From this point of view, in recent days the situation has worsened with Qatar delaying LNG shipments to Europe. According to what was reconstructed by ING analysts, Qatar has diverted at least six shipments bound for Europe from its regular route on the Red Sea since January 15. Furthermore, on Wednesday the first impact with theItalywith the energy group Edison which said an LNG cargo expected to arrive at the Italian terminal in the Adriatic Sea via the Suez Canal would not be delivered.
But the supply is not reduced
However, despite transportation challenges, the Qatar has not reduced its LNG exports with shipments in the last two weeks estimated to increase by 7% compared to the same period last year, again according to estimates from ING, which recalls that “so far the gas market has managed to remain substantially unchanged despite recent disruptions in the Red Sea,” with European gas futures “continuing to trade near six-month lows due to weak industrial demand, availability of alternative LNG supplies and higher inventory levels.”
Impact on transportation costs is not transferred to gas
Another interesting fact is that shipping disruptions in the Red Sea have so far had no impact on LNG transportation costs, although they have instead led to significant increases in container shipping costs and moderate increases in oil transportation rates. . “We believe this reflects the limited friction on LNG markets observed so far,” Goldman Sachs analysts say, highlighting that – while Suez LNG crossings have fallen sharply – higher US LNG volumes remaining in the Atlantic (compared to Asia-bound) help offset the decline in Qatari shipments to Europe (in favor of Asia).
Another factor to consider is the milder than average climate in Northeast Asia, which has weighed on Asian LNG import needs this month. “If this pattern continued, Qatari cargoes would be further incentivized to reach Europe via the longer and more expensive Cape of Good Hope route,” the US investment bank added.
Reassurances, both with regards to Europe and Italy, also arrived on Thursday from the words of Stefano VenierCEO of Snam, the first European operator in the transport of natural gas. “As regards the next few months – i.e. the winter tail end – clearly the market is not worried about a possible gas shortage, otherwise prices would have had different dynamics. This is in relation both to the high level of storage we have in Italy and Europe, but also to the fact that the possible limitation of cargo in Suez does not prevent arrival, but makes transport a little longer”.
Regarding the news of the last few days, Venier also said that he expects Qatar, which has a long-term contract with Edison, to continue shipping to Italy via different routes. He further stated that the United States will remain the main source of LNG for Europe and that gas fields located in the eastern Mediterranean – off the coast of Israel and Cyprus – could provide an alternative source of LNG for Europe.