Insight
What does closure of the Strait of Hormuz mean for Northeast Asian LNG market?
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Report summary
Energy flows through the Strait of Hormuz have halted, prompting QatarEnergy to declare Force Majeure on 4 March. - With 90% of Qatari and UAE LNG flowing to Asia, the region faces an unprecedented test of gas supply security. - Countries will initially have to draw down inventories and prioritise demand where needed. - Companies are scrambling for available spot cargoes. Asian benchmarks have rocketed above US$20/mmbtu, but alternative global supply cannot fully replace Qatari volumes. - Demand destruction is unavoidable. Key measures include increased coal utilisation in power, industrial production slowing down and oil product switching where possible. - The duration of the crisis is the key uncertainty. This insight examines how Northeast Asian markets will respond to a two-month supply shock from mid-March to mid-May.
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