Liquefied natural gas (LNG) traffic through the vital Strait of Hormuz is showing tentative signs of recovery, with September recording the highest number of vessel exits since the conflict began. Despite this uptick, the volume of LNG shipments remains severely constrained, operating at approximately 80% below pre-war levels, according to recent data.
Modest Recovery Amidst Continued Disruption
In September, around 17 confirmed LNG vessels transited the Strait of Hormuz, a significant increase from the zero crossings in March and single-digit figures in April and May. Prior to the conflict, the strategic waterway typically saw about 86 LNG vessel crossings each month. This continued shortfall highlights the persistent vulnerability of global gas supplies, particularly as winter demand approaches.
Qatar's Critical Dependence on Hormuz
The situation is especially critical for Qatar, one of the world's largest LNG exporters, as nearly all its exports must pass through the Strait of Hormuz. Data from ICIS indicates that Qatar exported only 18 LNG cargoes during the first six months of the war, a stark contrast to 509 cargoes in the corresponding period a year earlier.
Several Qatar-linked tankers were tracked crossing the strait in September, delivering LNG to key markets including India, Pakistan, and China. However, the precise number of crossings is uncertain due to some vessels switching off their tracking systems.
Production Constraints and Missed Deliveries
The disruption to LNG flows is not solely a shipping issue. Strikes have damaged two LNG production units at Qatar's Ras Laffan facility, reducing the country's overall production capacity by about 17%. Qatar's Energy Minister Saad Sherida Al-Kaabi stated that repairs could take up to three years, although other units could resume normal operations if safe transit through Hormuz is assured.
European and Asian buyers continue to face challenges. Italy's Edison, for example, has seen QatarEnergy extend force majeure on deliveries until early December, resulting in 35 missed Qatari cargoes since April. While 23 of these have been replaced, primarily with US LNG, other customers in Pakistan and Bangladesh have also been informed of ongoing delivery suspensions.
Oil Exports Show Faster Recovery
In contrast to LNG, crude oil exports from the Middle East have shown a faster recovery. Preliminary Kpler data reveals that crude exports rose to 16.3 million barrels a day in September, the highest since the war started, though still below the 19.5 million barrels a day recorded in February. This recovery is largely attributed to Saudi Arabia, whose exports climbed significantly. Crude shipments benefit from greater flexibility, as Saudi Arabia and the UAE possess pipeline routes that can bypass the Strait of Hormuz, a critical option unavailable for Qatar's LNG exports.
The September increase in LNG traffic, while an improvement, falls far short of a return to normalcy. The ongoing constraints on LNG traffic through Hormuz, combined with Qatar's production issues, will likely keep global gas markets under pressure, with alternative suppliers like the United States playing an increasingly vital role in meeting winter demand.