Oil prices on world markets went up amid increased tension in the middle East after a number of Arab countries decided to break off diplomatic relations with Qatar. Oil and gas markets cautiously reacted to the situation around Qatar, as the Emirate is the largest producer of liquefied natural gas in the world.
Saudi Arabia, UAE, Bahrain and Egypt decided to break off diplomatic relations with Qatar, which caused a rise in oil prices and fluctuations in the stock markets. Here are the consequences, part of which quotes the Wall Street Journal.
Reaction in the oil market reflects the fact that Qatar at least and is part of OPEC but is not a major oil producer. In April, he had produced 618 thousand barrels per day, representing about 2% of the total production.
In addition, this small state is considered to be the most important player in the gas market and is the largest exporter of liquefied natural gas in the world. In 2016, Doha exported for 77.2 million tonnes of gas, equivalent to one third of all the world’s supply.
The majority of deliveries of Qatari gas is supplied from a large gas field located in the Persian Gulf. In accordance with the annual report of BP Russia, and Iran, have large natural gas reserves than Qatar.
There are no signs that affect the supply Qatar gas to the world markets after the Arab countries severed relations with Doha.
Major gas customers of Qatar located in Asia is Japan, which imports 15 percent of its gas from Doha, as well as China and India, while countries in the Middle East buy from Qatar less than 5% of the total natural gas exports.
The Japanese company Jera Co, the largest importer of liquefied natural gas in the world, stated that it received assurances from Qatargas that recent events will not affect delivery.
The company explained that as yet there are no consequences, but it will closely monitor the geopolitical situation in the region. Under the contract the company Qatargas agreed to supply about 8 million tons of liquefied natural gas per year for Jera Co.
The price of natural gas is often determine the long-term contracts between consumers and exporters. Changes in oil prices in recent years, associated with the increase in supply in the global gas market.
Analysts believe that the severance of diplomatic relations between the Arab countries and Qatar will have a direct impact on leading consumers of energy, but if there are other events, that oil prices may begin to rise, which will also affect gas prices.
Despite the fact that Qatar is not a major oil producer, there are fears that the escalation of political tension, especially between Qatar and Saudi Arabia, will lead to the failure of the Emirate’s support for the current agreements of OPEC to reduce oil production, which was extended for another 9 months, until the end of the first quarter of 2018.
But some experts have probably not noticed a small share of Qatar in the agreement. Qatar has pledged to cut production by only 30 thousand barrels per day.
However, analysts believe that the price of the severance of relations with Qatar may be to increase the rate of oil production Doha, which will refuse to comply with an agreement to reduce production. This step may encourage other countries OPEC to protect their market share and increase production, which in turn will lead to the collapse of the agreement to reduce oil production.