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Qatar has extended its halt on contracted LNG deliveries through November. Buyers in Bangladesh, Pakistan, India and Italy must now hunt for cargoes on the open market. The US is the only large supplier with spare capacity, so US gas producers and oil companies selling LNG could gain.
Source: OilPrice.com ↗
When contracted LNG stops arriving, utilities keep buying. They turn to the spot market, where single cargoes are bought for quick delivery. Qatar, formerly the world's second-largest LNG exporter, is offline through at least November. Few suppliers can fill that gap. The US is the main supplier with spare loading room, at terminals such as Sabine Pass, Corpus Christi, Freeport and Cove Point. US gas costs are set by Henry Hub, the main US gas price. Spot cargoes to Asia and Europe now fetch far more. The gap between the two is the export profit, and it is widening. US companies with LNG businesses, such as Exxon Mobil (XOM) and ConocoPhillips (COP), stand to earn more. Gas producer EQT Corporation (EQT) could gain from stronger demand for US gas.
Investors see the Hormuz and Iran conflict as an oil story, with US crude (WTI) at $95, and as a general boost for energy stocks. They treat Qatar's LNG halt as a problem for Qatar and its buyers. In their view it hurts importing countries and is mostly a geopolitical headline.
Why that may be wrong
Investors mostly value US energy companies on the oil price and the general mood about energy. They overlook how LNG exports make money. Export profits depend on the gap between Henry Hub, the US gas price, and the Asian and European gas prices, JKM and TTF. Crude oil does not set that gap. With Qatar offline, JKM and TTF jump while Henry Hub barely moves. The wider gap lifts profits for US companies that turn gas into LNG, and oil-focused investors tend to underweight it. It also reaches share prices slowly, because most general energy investors do not track gas prices across several regions in real time.
The link fails if utilities in Bangladesh and Pakistan lack the foreign currency to pay high spot prices and cut power output instead. Demand would then shrink instead of moving to the spot market. Watch JKM, the Asian spot LNG price. If it fails to rise above $15 per million British thermal units within 3 weeks of Qatar's extension, buyers are not coming to the spot market in size.
Bangladesh and Pakistan are state buyers with little hard currency. They may not afford spot LNG at crisis prices, and could cut industrial and power output instead. Then demand would never shift to US exporters, and Asian prices would stay low. The weakest assumption is that all four cut-off countries have the reserves and the political will to pay up. Pakistan has gone through repeated IMF bailout talks and currency crises, so it may simply buy less. If Pakistan and Bangladesh cut back, the jump in spot demand will be much smaller than the lost Qatari supply suggests, and the gain for US exporters is overstated. A JKM spot price below $12 per million British thermal units within two weeks would show that shrinking demand is winning.
The 2022 Freeport LNG outage, which began in June and ran into the next year, is a close match in reverse. One major US export terminal went offline, removing about 2 billion cubic feet of gas a day from world supply. European spot LNG prices jumped about 40% in the following weeks. This time, a demand surge hits the remaining suppliers. The 2021 Suez Canal blockage lasted only 6 days, yet freight rates stayed 30-40% higher for weeks after it cleared. Qatar's halt is measured in months, so the pressure on spot LNG should last far longer. In the 2022 European energy crisis, US LNG exporters earned outsized margins as the supplier of last resort.
Qatar extends its LNG force majeure, a halt for reasons beyond its control, through November. Contracted supply to Bangladesh, Pakistan, India and Italy stops, removing a large volume from the global LNG market.
The cut-off buyers still owe power to grids and factories, so they rush into the spot market. Spot prices rise in Asia (JKM) and Europe (TTF) as supply tightens. US Gulf Coast terminals, whose contracts let cargoes go to any destination, become the main large-scale alternative. US plants that chill gas into LNG are pushed toward full capacity.
The gap between Henry Hub and overseas gas prices widens a lot. That lifts export profits for big US oil and gas companies that make and ship LNG, and for pipeline firms paid per unit of gas sent to export plants. These profits follow world gas prices, not crude, and general energy investors tend to underweight them in their models. The longer Qatar's halt lasts, the more spot deals US exporters sign at high prices. Spot deals usually run 1-3 months, so above-normal profits could last even after the Hormuz situation calms.
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