One Desk for Energy Trade, Risk Management and Gas Management

In one line: Brent is heading for its third weekly rise in a row. The fighting is spreading deeper into Saudi Arabia, fuel is still short, and the cost of moving oil by sea has shot up.

• Shipping costs have tripled. Shipping one crude cargo from Texas or Louisiana to a Chinese port now costs over three times what it did before the war. That has made US crude too expensive for many Asian refiners, and Asian orders for it have dropped to their lowest in years. Tankers swapping cargoes ship to ship off Oman tie up even more vessels, which pushes up freight on every long route.
• The war moves into Saudi Arabia. Militants based in Yemen struck a big Saudi oil field, one of the country’s main airports and a port on its Red Sea coast, and people were killed. Nothing stopped working, but the fear now is that the war is reaching the Gulf’s main production centres, not just Hormuz. The US is pulling diplomats out of the kingdom, a clear sign it sees the danger rising.
• Diesel is the pain point. More crude is getting through Hormuz again, with tankers sailing with their tracking switched off. Refined fuels are still stuck, though, and Ukraine keeps hitting Russian refineries. Diesel prices have jumped and some governments are dipping into emergency reserves.

In one line: Qatar, long one of the world’s biggest sellers, is now buying LNG from others to keep its promises. Asia keeps paying up, and Europe is winning Atlantic cargoes by only a thin margin.

• Qatar turns buyer. Its main export plant was hit early in the war. Now Qatar has agreed a long-term purchase deal with a large US exporter, and it is shopping for more gas from producers beyond the Gulf. A country that used to anchor world LNG supply is now buying other people’s gas to serve its own customers. That is a big change in how the market works.
• Asia pays whatever it takes. Indian, Chinese, Vietnamese and other Southeast Asian buyers are all hunting for prompt cargoes, at prices far above normal. With Gulf supply cut, many have little contracted gas to rely on before winter.
• Europe’s edge is thin. US exports are running high, and cargoes are switching course mid-voyage as prices move. Right now, sending US LNG to Europe pays slightly better than taking it around Africa to North-east Asia. That gap is small, and stronger Asian buying or a move in shipping costs could flip it.
• Europe is still short. Prices stay high. Storage is far below normal and it has fallen further behind its five-year norm, because less LNG is arriving and power stations started burning more gas early. Norwegian flows are lower than usual lately, with surprise outages at some fields, and a big French import terminal is temporarily shut.
• Britain is especially exposed. North Sea output keeps falling, so the UK needs much more LNG and Norwegian gas to cover cold days. A newly approved North Sea field helps a little but won’t change its reliance on imports.
• South Asia spreads its bets. Bangladesh has lined up LNG from North Africa, part of a wider move by South Asian buyers to depend less on the Gulf. That shift is likely to outlast the war.