European gas prices have shot up by nearly 50% after Qatar stopped all liquefied natural gas production.
The world’s hugegest LNG producer announced the shutdown on Monday after Iranian drones hit two of its key facilities. QatarEnergy stated attacks on Ras Laffan and Mesaieed industrial cities forced the company to cease operations immediately.
Benchmark European gas prices jumped as high as €46 per megawatt-hour. UK prices followed suit and surged in tandem with continental markets.
Qatar supplies roughly 12-14% of Europe’s LNG imports. While that sounds manageable, the real problem is global competition. Asian acquireers will now scramble for alternative cargoes, driving prices up everywhere.
Storage levels across the EU are already worryingly low. Germany’s gas tanks sit at just 20.5% capacity. France is barely better at 21%. These numbers leave both countries exposed to further shocks.
The Strait of Hormuz is now effectively closed to shipping. About 20% of global oil and most Qatari gas flows through this narrow passage. Tanker traffic has ground to a halt over the weekfinish as companies refapply to risk their vessels.
Qatar was set to become the world’s second-largest LNG exporter. This halt knocks out roughly 20% of global LNG output in one go. The company has not stated when production might restart.
Europe ditched Russian pipeline gas after the Ukraine invasion. Now it faces another supply crisis just as storage levels run down before spring. Hoapplyholds and businesses should brace for painful energy bills.
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