By: Mahmoud Gamal
Mubasher: Recent decisions taken by several Arab countries to sever their diplomatic ties with Qatar have brought about fears of impacts hitting the Qatari energy sector as well as its liquefied natural gas (LNG) supply to global markets.
On Monday, Saudi Arabia, Egypt, Bahrain, Libya, Yemen and the UAE announced cutting their diplomatic relations with Qatar, accusing the Gulf country of supporting terrorism.
The fallout, which created the largest political rift in the region in years, not only focused on diplomatic ties but extended to blocking all land, sea and airspace access, with several airlines saying they have suspended air traffic to and from Qatar.
Analysts told Mubasher that they expect the Qatari economy in general, and the energy sector in particular, to suffer greatly from this situation, indicating that the sector is one of the most important economic sectors for Qatar.
Qatar is the largest producer and exporter of LNG in the world and has achieved record profits from the gas segment, making it one of the richest countries globally.
A few hours after several Arab nations decided to boycott Qatar, Japan’s JERA Co. Inc., the largest LNG buyer, said it had been informed by Qatargas that the situation will not impact its LNG supplies.
There will be "no conceivable impact on LNG supplies" from the rift, JERA said in a statement, adding that it will keep an eye on updates in the matter as this is "a geopolitical issue in the Middle East and there is a possibility that this could be closely related to the energy market."
Commenting on the political rift, oil market analyst Yousef Hamid said that blocking land and sea access is likely to harm Qatar’s LNG supplies.
The issue now is a geopolitical one and there is a large probability that it will be tied to global energy markets, Hamid told Mubasher via phone.
He added that it was likely that Japan, the largest global LNG importer, which receives around a third of the world’s shipments will suffer after this rift, which is likely to hit the supplies between Qatar and Tokyo and other countries.
Qatar, a major exporter of condensates, a light kind of crude oil, caters to around a third of global LNG demand. Most of its exports go to Japan and South Korea in accordance with long-term contracts.
A rift in relations between Qatar and Saudi Arabia, the largest oil exporter in the world, as well as other Arab countries may hinder the agreement made by the Organization of Petroleum Exporting Countries (OPEC) to reduce oil output and boost prices.
Following the tensions that erupted on Monday, oil prices shrugged off the day’s early gains and declined, with Brent crude falling 48 cents per barrel (pb) or 0.96% to $49.47 pb, while West Texas Intermediate (WTI) crude lost 26 cents or 0.55% and closed the session at $47.40. pb
Although Qatar has one of the lowest production capacities in OPEC, around 600,000 barrels per day, it is considered a major and effective player in the organisation.
Translated by: Nada Adel Sobhi
