Rabobank’s energy strategists Joe DeLaura and Florence Schmit argue that global LNG markets, especially in Europe and Asia, would be pulled higher by Oil if Strait of Hormuz flows are threatened. Oil-indexed LNG and pipeline contracts would transmit crude spikes into gas prices, with Qatar’s outsized role in LNG balances making any disruption to its exports a key upside risk, even though Rabobank still assigns low probability to prolonged outages.

Oil linkage and Qatari risk dominate LNG

"Natural gas prices in Europe and Asia are most likely to be pulled higher by crude oil via the pass-through from oil-indexed LNG and pipeline contracts, with short-term spikes toward €40/MWh."

"A first upside trigger would come via oil markets: a steep spike in crude prices would, by default, lift the cost of oil indexed LNG contracts, tightening global LNG balances. More significantly, any retaliation by Iran against Saudi, Emirati, Iraqi or even Qatari energy infrastructure would have an outsized impact on gas prices."

"Qatar—soon to cement its role as the world’s second largest LNG exporter after the US—plays a disproportionate role in balancing both Asian and European markets. If Qatar were unable to export LNG cargoes because of infrastructure damage or shipping impairments, the effect on global gas prices would be dramatic."

"However, we see the probability of any meaningful long-term disruption to Qatari LNG exports as low, limiting the likelihood of a more extreme spike in gas prices."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)