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Gulf Tensions Will Impact Nat Gas More than Crude Oil

July 01, 2019

At its narrowest point, the shipping lane in the Strait of Hormuz is only two miles wide. Bloomberg reports that a U.S. – Iran conflict will impact natural gas markets more than crude oil. Nearly 25% of the world’s LNG supply passes through the Strait of Hormuz while the thoroughfare is the pathway to 17% of global crude trade. Additionally, natural gas importers typically carry much less supply in inventory relative to crude oil. Macquarie predicts that the spike in LNG would be double the increase in crude oil prices.

Qatar and UAE are the two major LNG exporters in the region who rely on the Strait, exporting about 11 bcf/d, mostly to Japan, Korea and India. To bring this into perspective, U.S. demand was 98.72 bcf/d this past winter (Nov-Mar) and about 72.56 bcf/d in the most recent summer season (Apr-Oct).