Qatar’s dispute with Arab states puts oil, LNG markets on edge
SINGAPORE/LONDON: Oil prices fell more than 1% on Monday on concerns that the cutting of ties with Qatar by top crude exporter Saudi Arabia and other Arab states could hamper a global deal to cut production.
Saudi Arabia, the United Arab Emirates, Egypt and Bahrain closed transport links with top liquefied natural gas (LNG) and condensate shipper Qatar, accusing it of supporting extremism. The move initially pushed Brent crude prices up as much as 1% as geopolitical fears rippled through the market. But Brent later reversed gains, trading down 59 cents at $49.36 a barrel by 1322 GMT.
US West Texas Intermediate futures were at $47.14 a barrel, down 52 cents.
With production capacity of about 600,000 barrels per day (bpd), Qatar’s crude output is one of OPEC’s smallest but tension within the Organization of the Petroleum Exporting Countries could weaken the supply deal, aimed at supporting prices.
“I think it’s still going to be a bit of a debate on the true impact it can have on the oil market,” said Olivier Jakob, strategist at Petromatrix.
“In terms of oil flows it doesn’t change very much but there is a wider geopolitical impact one needs to consider,” Jakob added, explaining that a breakdown in relations between Qatar and Saudi Arabia could make the OPEC-led agreement on production cuts less effective.
There are already doubts the effort to curb production by almost 1.8 million bpd is seriously denting exports.
While there was a dip in OPEC supplies between February and April, a report on Monday by Thomson Reuters Oil Research said OPEC shipments likely jumped to 25.18 million bpd in May, up over 1 million bpd from April. The move to cut ties with the world’s top seller of liquefied natural gas (LNG), stoked concern over any supply disruptions to neighbouring countries spilling over into global gas markets.
US Secretary of State Rex Tillerson, who accompanied President Donald Trump on his trip to Saudi Arabia last month, was CEO of Exxon Mobil—Qatar’s key Western partner in building its giant LNG export plants.
As the rift lifted oil prices, LNG traders took a wait-and-see approach, alert to potential disruption of regional energy flows but erring on the assumption that any trade shocks could be contained given well supplied global markets.
Qatar’s top clients in Japan and India quickly received reassurances that supplies would continue as usual. Within hours of the diplomatic break, the UAE barred all vessels coming to or from Qatar using its popular anchorage point off Fujairah.
The ban impacts about six LNG vessels linked to Qatar now anchored in the Fujairah zone which may need to be moved out, according to shipping data on Thomson Reuters.