Bab al-Mandeb Strait closure affects global LNG trade
Date
5/16/2024 8:12:45 AM
(MENAFN) Reports from Bloomberg International, as relayed by Sky News Arabia, highlight the significant disruption caused by ongoing violence in the Bab al-Mandab Strait, a vital maritime passage connecting the Arabian Peninsula and Africa. Notably, the strait has not seen the transit of any liquefied natural gas (LNG) tankers for four months, underscoring the profound repercussions on global energy trade.
Prior to the escalation of conflict, dozens of LNG tankers traversed the Bab al-Mandab Strait monthly. However, attacks by Houthi rebels in Yemen have rendered the passage impassable since mid-January. Consequently, ships have been compelled to reroute around Africa to facilitate fuel transportation between the Atlantic and Pacific basins, resulting in limited supplier options and escalated shipping costs for buyers. This situation has led to a fragmentation of the global LNG market, posing logistical challenges for traders.
Patrick Dugas, head of LNG trading at Total Energies, emphasized the current surplus of LNG cargo between the Atlantic and Pacific basins, noting the increased economic difficulty of inter-basin cargo movement. This underscores the strain imposed on market dynamics by the strait's closure and the ensuing rerouting of shipments.
To mitigate transportation expenses, merchants are seeking destinations closer to production sites for their LNG shipments. This trend is anticipated to intensify as demand for fuel escalates in preparation for the upcoming winter, during which shipping costs typically rise. Consequently, there is a concerted effort to optimize shipping routes and minimize expenditure amidst the ongoing disruption in global LNG trade caused by the closure of the Bab al-Mandab Strait.
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