LNG pricing to jump sharply as Gulf shutdown traps vessels and drives six-figure spot rates

GasLog chief operating officer Konstantinos Karathanos told Riviera the situation is “very dire” and likely to have a lasting impact, regardless of how quickly the conflict ends.

He noted that roughly 20% of global LNG exports originate from Gulf countries, with most volumes destined for Asian markets. However, production facilities in the region have now shut down after reaching tank tops.

“In addition to this, around 20 LNG carriers are currently trapped in the Gulf, which is almost the same number as open vessels available globally,” Mr Karathanos said.

He described the impact as two-fold. “The commodity price will skyrocket – we are already seeing this in both Asia and Europe with increases of over 40% – and tonne-mile demand will also peak. It has taken only two days for the LNG spot market to climb to six-figure rates,” he added.

On the likely duration of the crisis, Mr Karathanos said that while a swift resolution is hoped for, even under the most optimistic scenario, disruptions could last several weeks and potentially months.

“The effect on LNG shipping will outlast the conflict itself for a few months, until the region returns to preconflict normality,” he said.

Notably, GasLog has established a task force to monitor developments and provide operational guidance, while maintaining crew safety as its top priority.

Rates spike

LNG carrier spot rates rallied sharply on 3 March following Iran’s declaration regarding the closure of the Strait of Hormuz and QatarEnergy’s announcement of further production suspensions.

According to Spark Commodities data, the Spark30S Atlantic LNG carrier daily spot rate for 174,000-m³ two-stroke vessels reached US$161,750, marking its largest day-on-day increase on record – a jump of US$100,250. “This marks the highest Atlantic freight rates since November 2023,” the company noted.

The Spark25S Pacific index also climbed significantly, rising by US$57,750 to US$98,750 per day.

“Despite oil markets being significantly affected by the closure of the Strait of Hormuz, LNG markets have experienced the greatest volatility during this week’s dramatic events,” Spark Commodities said.

ICIS senior LNG analyst Alex Froley told Riviera that LNG carrier charter rates are spiking higher amid the conflict with Iran, although the market remains thin and volatile.

Fixtures have reportedly been concluded at around US$100,000 per day, with market talk suggesting levels as high as US$200,000-$300,000 per day. However, no deals have yet been confirmed at those higher levels.

“These rates could be up to 10 times higher than the recent lows heard in the market,” Mr Froley said.

Meanwhile, Europe’s TTF gas price – the main benchmark for European natural gas – rose as high as €65/MWh (US$77MWh) on 3 March, roughly double the €32/MWh recorded on 27 February and above the €48/MWh peak seen on 2 March.

LNG carriers have continued to avoid transits through the Strait of Hormuz since the afternoon of 28 February.

QatarEnergy halts production

On 2 March, QatarEnergy disclosed it had halted LNG and associated production due to “military attacks” on its facilities in Ras Laffan and Mesaieed industrial cities.

The following day, the company announced it would also suspend production of certain downstream products in Qatar, including urea, polymers, methanol and aluminium.

Poten & Partners said in a report that exports from Ras Laffan account for approximately 18% of global LNG supply.

“Although Ras Laffan industrial city was hit by a drone strike on 2 March, the shutdown may also reflect the need for an orderly suspension of production as storage tanks approach capacity,” Mr Froley said.

Maritime Strategies International noted that with roughly one-fifth of global LNG exports transiting the Strait of Hormuz, shipments from Qatar and the UAE have no realistic alternative routes. LNG export capacity is concentrated in just two locations within the Gulf – plus a further one in Oman – making it proportionally more exposed to direct missile or drone attacks than the more geographically diversified oil export infrastructure, analysts said.