LNG traffic through the Strait of Hormuz falls sharply: S&P Global Energy

Renewed escalation in the US-Iran conflict is sharply reducing LNG exports from the Persian Gulf, reversing the brief recovery that followed the June 17 agreement intended to facilitate commercial transit through the Strait of Hormuz, according to new analysis from S&P Global Energy.

India is rerouting crude oil and LNG imports via the UAE and Oman to bypass rising risks in the Strait of Hormuz, said media reports. Iran has reportedly warned that if its own oil exports remain blocked, it could target alternative export routes, including the Fujairah pipeline and Saudi Arabia's East-West pipeline.

Vessel tracking data from S&P Global Energy shows that the combined 10-day moving average of laden LNG transits through the strait fell from roughly 0.8 cargoes per day in late June to just 0.2 cargoes per day by July 15.

Only one LNG cargo is known to have exited the Persian Gulf in the past week, reflecting mounting caution among shipowners after the July 7 attack on QatarEnergy LNG’s Al Rekayyat, the first direct strike on an LNG vessel since the conflict began, with another laden vessel appearing to be attempting a transit as of the morning of July 17.

“LNG traffic through the Strait of Hormuz has fallen back to levels last seen in early June, well before the June agreement created a temporary window for renewed movement. Our outlook increasingly points to shipping constraints, rather than the ramp-up of liquefaction capacity, as the main factor limiting exports,” said Mehrun Etebari, Senior Principal Analyst at S&P Global Energy.

The slowdown in exports stands in sharp contrast to activity at liquefaction plants. LNG production and vessel loadings at QatarEnergy LNG and the UAE’s ADNOC LNG have continued at a relatively robust pace despite the disruption to outbound shipping. This has resulted in a growing inventory of LNG aboard tankers waiting inside the Persian Gulf.

Seven laden Qatari LNG carriers alone were estimated to be holding around 0.57 million metric tons of LNG as of mid-July, while S&P Global estimates that nearly 1.9 million metric tons of LNG tanker capacity is currently positioned inside the Persian Gulf—the equivalent of around 8 days’ worth of typical pre-war peak exports from the two projects.

Should the effective blockage of the Strait of Hormuz ease in the coming weeks, these vessels could enable a relatively rapid increase in exports, releasing LNG that has already been produced and loaded.

The analysis notes that intermittent disruptions are likely to continue while security risks remain elevated, but a reopening of transit routes could unlock substantial export volumes already waiting within the Gulf and materially improve the outlook for global LNG supply.