Gulf States Launch Naval Blockade Of Qatar

In what has emerged as the most significant escalation to result from the Qatar diplomatic crisis - which pits two of OPEC’s largest oil producers, Saudi Arabia and the UAE, against the world’s biggest exporter of liquefied natural gas and further disrupts stability in the region -  the biggest Middle East oil and container ports banned all vessels sailing to and from Qatar from using their facilities.

According to a notice posted on the website of Inchcape Shipping, Saudi Arabian and Bahraini authorities closed off all of their ports to Qatari-flagged vessels or ships traveling to or coming from the Persian Gulf state, in what has been described as a naval blockade. 

As Bloomberg adds, container and oil terminals in the United Arab Emirates also closed off traffic to any ships touching Qatar.

Saudi Arabia’s eastern coast is home to the port of Ras Tanura, which state-owned Saudi Arabian Oil Co. says is the biggest crude terminal in the world. Jebel Ali port, the region’s biggest container terminal, will be restricted from Tuesday until further notice, its operator Dubai’s DP World Ltd. said in an emailed statement according to Bloomberg. In the U.A.E., DP World operates Jebel Ali along with Dubai’s Mina Rashid and Mina Al Hamriya ports. Elsewhere, government-owned Abu Dhabi National Oil closed its crude and refined-product ports to any vessels to or from Qatar. The port at Fujairah, a main oil transit and refined product hub, said Monday it was closed to Qatar-linked traffic.

For now, shipping at Egyptian ports was operating normally as of Tuesday, according to Inchcape. The company also said the Suez Canal Authority has advised that there aren’t restrictions on vessels in the waterway since it is an international route.

Separately, Bloomberg also reported that A.P. Moller-Maersk A/S, which owns the world’s biggest container line, said it can no longer get cargo to Qatar as a result of the Saudi-imposed blockade of transport to and from the Gulf state.

Though the situation remains “very fluid,” with updates expected throughout the coming hours, Maersk Line expects “disruptions to our Qatar services,” spokesman Mikkel Elbek Linnet said in an emailed statement on Tuesday. For now, “we have confirmation that we will not be able to move cargo to or from Qatar,” he said.

Maersk Line doesn’t use its own vessels to bring cargo to Qatar, but relies on third-party so-called feeder services from the United Arab Emirates Jebel Ali port in Dubai. “We will notify our customers on alternatives as soon as possible,” Linnet said.

Maersk ships about 16 percent of the world’s seaborne freight, making it the global leader in container transportation. Maersk, which has been working on splitting off its energy business to concentrate on its transport operations, said last year it lost the biggest oil field in its portfolio when Qatar ended a 25-year partnership with the Danish company. The agreement allowing Maersk to operate the Al Shaheen offshore field expires next month, after the company lost its bid for renewal to Total SA.

In addition to crippling overall Qatar-bound trade, the sea blockade will hurt shipments of oil and refined products from the world’s biggest energy exporting region.

According to Per Mansson, a shipbroker at Affinity Shipping in London, the Saudi ban on vessels going to and from Qatar will create logistical difficulties for some combination charters of crude oil supertankers from the Persian Gulf and will likely increase the use of smaller vessels. "It will be a little more difficult, it will be a little bit more tricky for certain charters”: Mansson said, noting that there are “not huge quantities” of oil being exported from Qatar relative to other Gulf states.

Afffinty also says that the combination charters, where loading occurs in more than one nation, are popular on routes to Japan, Korea and adds that the use of Suezmax and Aframax ships on Qatar routes may increase. That said, companies could still book combination charters with Qatar and other nations that don’t have restrictions, including Iran and Iraq.

Yet while the shipbroker tried to talk down the potential impact of the shipping ban, according to Bloomberg oil strategist Julian Lee, blocking vessels going to/from Qatar is probably the most important direct move that Saudi Arabia has made in terms of hindering its smaller neighbor’s ability to export crude oil and condensates.

Saudi Arabia’s move mirrors similar restrictions by United Arab Emirates, which will mean ships going to/from Qatar no longer have access to the Middle East’s biggest refueling center at the port of Fujairah.

According to Bloomberg, 27 of 31 vessels that loaded Qatari crude, condensate in May co-loaded in either Saudi Arabia or the UAE.

The good news is that aside from the above, Lee believes that there is little reason - so far - to believe that measures against Qatar will have a materially negative impact on country’s energy exports.

* * *

Finally, there is the question of LNG shipments.  Here, as Reuters reported earlier, LNG traders took a wait-and-see approach, alert to potential disruption of regional energy flows "but erring on the assumption that any trade shocks could be contained given well supplied global markets."

Qatar's top clients in Japan and India quickly received reassurances that supplies would continue as usual. Whether this persists is unclear: within hours of the diplomatic break, the UAE barred all vessels coming to or from Qatar using its popular anchorage point off Fujairah. The ban impacts about six LNG vessels linked to Qatar now anchored in the Fujairah zone which may need to be moved out, according to shipping data on Thomson Reuters.


But there was little sign yet of LNG supply being hit. "I cannot see this impacting exports of Qatari LNG outside the Arab world at all and it won't likely impact LNG and gas pipeline exports within the Arab world either," Morten Frisch, an independent LNG and gas industry consultant, said. Still, traders startled by the development began to plan for all eventualities, especially any upsets to piped gas supplies from Qatar to the UAE.

Egypt, while relying heavily on Qatari LNG brought in by Swiss commodity trade houses, is less vulnerable than the UAE because it has no direct deals with Qatar, domestic gas output is squeezing out the need for imports, and traders would be liable for any moves by Qatar to restrict exports.

"Trafigura, Glencore and Vitol frequently take LNG from Qatar and deliver it to Egypt but they take ownership of the cargoes at the Qatari port and don't use Qatari ships, meaning technically that Qatar shouldn't have sway," one trade source said. In reality though, Qatar can block exports to certain countries by issuing so-called destination restrictions.

"It's not clear yet," another LNG trader said of potential impacts to deliveries from Qatar to Egypt.

* * 

Can (and will) Qatar respond to the blockade?

Retaliatory measures such as suspending LNG supply deals would leave Qatar free to push more volumes into Europe where it has access to several import terminals. Under that scenario, trade houses with supply commitments to Egypt could turn to the United States, Algeria and Nigeria for replacement cargoes, traders and industry sources told Reuters.

The deterioration in ties between Qatar and Egypt contrasts with 2013 when the producer gifted five LNG cargoes to Egypt - when Mohamed Mursi, leader of the Muslim Brotherhood, served as president. Ironically, it is Qatar's support for the MB - if only according to the "official narrative" - that is the catalyst for the current crisis.


Looney BaBaBouy Tue, 06/06/2017 - 14:38 Permalink

  It looks like Russia’s Gasprom is going to be the main beneficiary of Qatar’s “problems”.  ;-) LooneyBTW… Yesterday, a Russian Big Wig said that “Russia is planning to maintain all economic and diplomatic ties with ALL Arab countries, including Qatar".

In reply to by BaBaBouy

bluez J S Bach Tue, 06/06/2017 - 15:41 Permalink

Liquefied gas is natural gas that is refrigerated to a point where it condenses to a liquid state, which is presumably thousands of times more compact, and thus transportable by tanker ships. By the way, 50% of the gas is burned (thus lost) to power the vast refrigerators that are needed.

In reply to by J S Bach

Squidward_Tentacles J S Bach Tue, 06/06/2017 - 17:54 Permalink

Quite easy.  Just drop the temperature and increase the pressure enough and the gas becomes a liquid.  Parameters depend on what gas you are trying to liquify.   Propane is quite easy.   What do you think is in the tankers that deliver gas to your tank for your house?  It's a liquid...  Ever seen those liquid nitrogen tanks driving around the intersates of the US?  They do it by cryogenic distillation to separate the oxygen and nitrogen which are the major components of our atmosphere.

In reply to by J S Bach

any_mouse J S Bach Tue, 06/06/2017 - 18:45 Permalink

Word plays.

Current state is a physical function of temperature and pressure for a given molecule.

The individual molecules don't have a say in the state. They can't identify as liquid, solid, or gas.

Fun experiment. Place a bottle of soda in the freezer. Wait. At some point the bottle will still contain liquid. Cracking the cap open, releasing pressure, will result in an instantaneous transition from liquid to solid. Wait too long and the temp drops too much, the transition will occur and the expansion from liquid to solid will occur under pressure with messy results. Get your parents permission before trying this at home.

Anyway, real examples you probably encounter in daily domestic life.

Ice, solidified form of H2O. Removes heat. Never should be used in beer. Use in distilled alcohol is debated. Fun surface for sliding and skating. "Hockey Night in Canada" would not exist without ice.

Steam, gaseous form of H2O. Transfers heat and moisture. Steam emitting from a vehicle is not a good sign. Steam from a steam iron is good. A steam room is good until it is not. Steamy tropical jungles.

Water, liquified form of H2O. Quenches thirst and is required input for healthy function of a body. Used in conjunction with distilled alcohol. Water polo would not exist in perpetual ice environment such as Canada.

Gasp, on some planets the natural state of a molecule could be different than on Earth. Especially a Flat Earth.

In reply to by J S Bach

HowdyDoody bluez Tue, 06/06/2017 - 17:32 Permalink

I bet the ISIS Air Force (IAF*) fly boyz waited until the Russian aircraft had returned for refueling before they pulled that act of agression.

There is no de-escalation zone around al Tanf. That is bs pulled out of some IAF commanders ass.

* - IAF is also the abbreviation for the other part of the ISIS Air Force, namely the Israeli Air Force. What a coinkydink.

In reply to by bluez

Joe Trader Badsamm Tue, 06/06/2017 - 15:06 Permalink

As long as LNG tankers can travel freely - Qatar will continue eating Russia's lunch in Eastern Europe - through the new LNG terminal in Poland & it's NATGAS network which could supply much of Eastern Europe. These markets alone equate to a major market like France in terms of demand. American LNG has also made one or two deliveries to the new LNG port in that area..Qatar's hurt long-term, but appears less affected short-term..

In reply to by Badsamm

Joe Trader HoyeruNew Tue, 06/06/2017 - 19:03 Permalink

It's discounted. pipeline from Norway to Eastern Europe will also get built - from which the vast majority of Poland's NATGAS will be supplied from. The purpose of diversifying energy sources - is so that Poland won't get hurt at the whim of a Russian decision. You can ramble all you want - but the Polish market alone is close to as big as France's, and with Visegrad 4 countries also plugging in, that pushes the entire region into the loss of major demand for Russia. So this is mainly about diversifying energy sources, rather than trying to inflict harm on Russia as you think.

In reply to by HoyeruNew

LightBulb18 Looney Tue, 06/06/2017 - 16:17 Permalink

I am not A Jew who is trying to be liked by American gentiles. The way I figure it, if Jewish people figure out that the Jews run all sides, and white gentiles figure it out as well, then the Jews of Israel will stop submitting to American and European free speech and policy demands for the Jews of Israel and we will no longer have to suffer under multiculturalism. White gentiles wont either once they have been ‘perfected’ to accept Jewish inequality, non white inequality, and class inequality.

In reply to by Looney

caconhma skbull44 Tue, 06/06/2017 - 15:04 Permalink

Our Agent Orange trip to the Middle East has been a complete catastrophe. Zionist Mafia got US in another big war. This POS must go! His actions damage the US national interests beyond repair.The US/SA $350B arm deal was SA downpayment for the US support for a war against Qatar!

In reply to by skbull44