Qatar, a leading global liquefied natural gas exporter, has decided to temporarily halt the movement of tankers through the Red Sea. This decision comes in response to US-led strikes targeting Houthi militants in Yemen, which have disrupted a crucial trade route. The Houthi attacks on ships, conducted in solidarity with Palestinians, have not only caused disruptions in global commerce but have also raised concerns among major Western powers. These events are seen as a spillover effect from the more than three-month-long conflict between Israel and Hamas fighters in Gaza.
In the latest development, QatarEnergy, the state-owned energy company, has reportedly held back at least four LNG tankers from traversing the Red Sea, as confirmed by a senior source. Despite this interruption in tanker movements, production activities are said to be continuing. The decision by QatarEnergy follows a series of US and British strikes against the Houthi militants in Yemen. While the Houthis have been engaged in a long-standing conflict with a Saudi-led coalition, their recent focus on the sea as a means to exert pressure on Israel has escalated tensions in the region.
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The US military reported that on Sunday, its fighter aircraft successfully shot down an anti-ship cruise missile fired by the Houthis toward a US destroyer. No injuries or damage were reported in this incident. In a notable impact beyond the energy sector, Japanese carmaker Suzuki announced a temporary halt in production at its Esztergom plant in Hungary from January 15-21. This delay was attributed to the Red Sea attacks, which disrupted the arrival of Japanese-made engines.
The Houthi militants have declared their intention to persist in targeting ships linked to Israel and have vowed to respond firmly to the attacks against them. While the US ally, Britain, expressed a reluctance to become involved in a Red Sea conflict, it affirmed its commitment to safeguarding the right of free navigation. The situation remains fluid, and Defense Secretary Grant Shapps has suggested waiting to see how events unfold before considering potential further strikes.
LSEG shiptracking data revealed that several of Qatar’s LNG vessels, including Al Ghariya, Al Huwaila, and Al Nuaman, loaded LNG at Ras Laffan and were en route to the Suez Canal before making stops near Oman on January 14. Another vessel, Al Rekayyat, traveling back to Qatar, made a stop in the Red Sea on January 13. The decision to pause movements through the Red Sea is reportedly a precautionary measure for security reasons. If passing through the Red Sea remains unsafe, there is consideration of an alternative route via the Cape of Good Hope, albeit adding approximately nine days to the typical 18-day journey to Europe.
The disruptions caused by the Houthi attacks on ships in the Red Sea have had a broader impact on maritime trade, especially affecting the Suez Canal. Some vessels have resorted to rerouting through a much longer East-West route via the southern tip of Africa. Approximately 12% of world shipping traffic transits through the Suez Canal, making any disruptions significant.
Front month European benchmark gas prices on the Dutch TTF hub experienced a decline of 1.20 euros, reaching 30.40 euros per megawatt-hour (MWh) in early trade on Monday, according to LSEG data. Additionally, Asia spot LNG prices reached a seven-month low of $10.10 per million British thermal units (mmBtu) on Friday, influenced by robust storage levels in Europe and northeast Asia.
Despite escalating tensions in the Middle East, oil prices edged lower on Monday. The conflict has not yet affected oil supplies, and last week’s 2% rise in oil prices was driven by concerns over potential disruptions arising from the ongoing conflict. The situation continues to unfold, with the international community closely monitoring developments in the region.
