Qatar Extends Force Majeure Amid Hormuz Crisis Blocking LNG Traffic

Natural gas prices ticked higher on September 1, with the United States Natural Gas Fund (AMEX:UNG) climbing 2.03% to 10.54 dollars, as Qatar extends force majeure on its liquefied natural gas shipments for another stretch, deepening a supply disruption that has now stretched past six months.

QatarEnergy told buyers in Pakistan and Bangladesh this week that cargo cancellations will run through October, according to traders familiar with the matter. Cargoes bound for Europe under long term contracts have also been pulled, with Italy's Edison confirming that cancellations and the force majeure declaration now extend into early November. That marks yet another postponement for a crisis that began when fighting between Israel and Iran shut down LNG traffic through the Strait of Hormuz back in the spring.

Why Qatar Extends Force Majeure Again

Edison disclosed at the end of July that Qatar had scrapped three more of its scheduled cargoes, pushing the force majeure window out to September. As of July 28, the Italian utility counted 24 delayed shipments dating back to April, equal to roughly 3 billion cubic meters of gas. The latest extension into November shows the bottleneck has not eased, even as oil tankers have found workarounds. Crude producers in the Gulf, Qatar included, have leaned on ship to ship transfers to move barrels around the strait when direct passage looked risky. LNG carriers do not have that option. Reloading liquefied gas from one vessel to another at sea is far more technically demanding and rarely done outside dedicated terminals, so tankers carrying LNG have effectively been stuck.

A $24 Billion Hole in Qatari Exports

Reuters calculations put the damage at 24 billion dollars in lost sales for Qatar since the Hormuz disruption began, a striking figure given the country's standing as the world's second largest LNG exporter. Shipments have fallen by as much as 96% compared with normal volumes. Data from ICIS, cited by Reuters, shows Qatar managed just 18 cargo shipments during the affected period this year, compared with 509 over the same stretch last year. That gap illustrates how thoroughly the strait closure has throttled one of the most important gas corridors on the planet, even as oil flows through the same waterway have reportedly rebounded in recent weeks.

What the UNG Move Signals for Traders

UNG's 2.03% gain to 10.54 dollars sits well within its 52 week range of 9.54 to 12.11, and an RSI reading of 58.29 suggests the fund is neither overbought nor oversold at current levels. Still, the timing lines up with renewed attention on the Qatari supply gap. Natural gas prices respond to a mix of forces, weather, storage levels, domestic production and the dollar's strength among them, but a disruption of this scale from a major exporter tends to ripple through global balances even when the direct effect on the U.S. domestic market is modest. Buyers in Pakistan, Bangladesh and parts of Europe are the ones absorbing the immediate pain of canceled cargoes, forced to scramble for substitute supply elsewhere.

How Long Can Alternative Supply Fill the Gap

With QatarEnergy's declared force majeure now running into a seventh or eighth month depending on the contract, affected importers face a stretch of uncertainty heading into winter demand season. Whether the Strait of Hormuz reopens fully to LNG traffic before then remains the question hanging over the market, one that oil tankers have already answered for themselves but that gas carriers still cannot.

Live crude oil price and chart →