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Qatar Spat Affects Crude Oil Loadings In The Middle East

Oil

After several Arab nations cut ties with Qatar, port authorities in Saudi Arabia, the UAE, and Bahrain have barred Qatar-flag or owned vessels from calling at their ports, thus making crude and oil product loadings in the Persian Gulf more complicated, and making large oil importers change loading plans.

Saudi Arabia, Bahrain, the UAE, Egypt, Yemen, and Libya have now cut diplomatic ties with Qatar, accusing it of sponsoring terrorism and destabilizing the region.

Although initial assumptions were that Qatar’s LNG and oil trade would not be directly affected, the port authorities’ restrictions on Qatari vessels are prompting buyers to change plans overnight, and could increase bunker prices outside the Middle East region, Platts said in an analysis on Tuesday, citing Asian shipping industry officials.

Qatar—an OPEC member with around 600,000 bpd of crude oil output—is the world’s biggest LNG exporter.

Saudi Arabia said it was closing all land, sea, and airports to Qatar, as soon as it announced it was severing ties with Doha.

The Port of Fujairah in the UAE said on Monday that “vessels flying flags of Qatar or vessels destined to or arrival from Qatar ports are not allowed to call Port of Fujairah and Fujairah Offshore Anchorage regardless their nature of call till further notice.”

All Bahrain ports are also off limits for sea traffic to and from Qatar, according to Bahrain’s Ministry of Transportation and Telecommunications.

According to Platts sources, one of the biggest oil importers changed the loading plans for VLCCs overnight to avoid potential issues that would arise from the spat.

Our VLCC was due to load partial cargoes, first in Qatar and then in the UAE and the port agent had given the nod to bring the ship in [to the UAE] but we did not want to take a chance,” a source involved in loading crude oil on a VLCC on the route Persian Gulf-East Asia, told Platts.

According to Platts, the port restrictions in the UAE and Bahrain imply that while there will be no direct Qatar-UAE/Bahrain shipment, cargoes could still be loaded and co-loaded if the tankers stop at third ports.

But by imposing restrictions on Qatari vessels, the UAE risks losing bunkering revenues because Fujairah has been a favorite bunkering port in the Middle East, due to its huge storage space and cheaper fees compared to other ports.

Related: Can Canadian Crude Compete In Asia?

Bunkering is a major source of revenue for the UAE and by not allowing ships embarking from Qatar or planning to go there to come to Fujariah will hurt its hub status,” a VLCC broker in Singapore told Platts.

While it’s easier for the biggest companies and buyers to swap cargoes in co-loaded vessels, smaller traders with just a few cargoes may not be able to easily swap cargoes and could see higher freight fees as well as additional expenses.

According to Platts, shipping executives hope that the cargo loading chaos and legal conundrum would be resolved in a week.

“Otherwise it will be a mess,” one VLCC broker told Platts.

By Tsvetana Paraskova for Oilprice.com

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  • Naomi on June 07 2017 said:
    VLCC will load last at Qatar. Disruptions will be minimal after the sequence is adjusted.

    Qatar could cut off natural gas to Saudi Arabia. Without natural gas to power Saudi electricity the temperature in the apartments throughout Saudi Arabia would rise to 150 degrees F. That would raise quite a stink. I know fat Saudis and they are not fighters like the Qatari. Notice Saudis have no army in Yemen. Iran would come to aid Qatar. I am confident that OPEC et.al. could quickly compensate for the the loss of 10 million bbl/day of Saudi Oil or 10 million cubic meters of Qatari LNG. Both nations should stockpile food.
  • Stephen J Beard on June 06 2017 said:
    Okay, I'm not up on everything's that going on in the Middle East, but Qatar, seriously? Being beat up by Saudi Arabia (origin of the 9/11ers), Libya (serious ISIS problems), Bahrain, the UAE, Egypt, and Yemen (at war with the Saudi's) for financing Middle East terror? This is nuts!

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