Fast changing dynamics of global LNG market.

Byline: Shabbir

Qatar witnesses a prosperous start to 2021, first scoring a major political goal by restoring diplomatic relations with Saudi Arabia and ending its almost 4-year long embargo. Following a political breakthrough come an unexpected revenue bonanza, which saw Doha happily riding the waves of spiking Liquefied Natural Gas (LNG) prices in Asia. The combination of both developments - Qatar casting away its pariah state and probably playing a more nuanced role as it finds itself between Saudi Arabia, Iran and the still-skeptical UAE, as well as its low-cost LNG production becoming a staple diet of North East Asian LNG demand has elevated the Middle Eastern state into worldwide limelight. All this, however, also means that in the manifold connections Qatar has been trying to build with Europe may start to slowness.

The January 2021 LNG spike in Asia was a combination of three key factors - low temperatures, low spot cargo availability and persisting COVID-19 ramifications. All three were vastly intertwined; low temperatures by themselves need not cause a market distortion if there is ample LNG production on the market. This wasn't the case mid-January as long-term Brent-pegged, LNG deliveries were as usual. However spot cargoes were very few and those who missed out on them risked missing out altogether. Qatar's competitors, due to their geographic location and previously concluded commercial commitments, could not reorient such volumes towards Asia.

The fact that Asia needed LNG urgently was further supported by the fact that January 2021 LNG arrivals have reached an all- time high of 28 million tons LNG. A whopping 23 percent of this came from Qatar and only 6 percent and 5 percent, respectively, from the United States and the Russian Federation. The oil-linked nature of Qatar's LNG exports has for once turned out to be beneficial for the buyers at large, being naturally capped to the price of the global benchmark they could only increase as high as crude did. Luckily for Asian buyers nominating term volumes from Qatar lately, crude was largely stagnant amidst surging Asian LNG prices. For Qatargas this was an impressive tour de force after all the travails with Ras Laffan liquefaction trains necessitating unplanned maintenance.

Simultaneously to Qatar deluging the Asian market with its LNG cargoes, its supplies to Europe have plummeted by an unprecedented measure. After a gradual ramp-up of exported volumes, Qatar's monthly LNG...

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