For U.S. natural gas investors, Qatars problems may be the American natural gas industrys opportunity. Diplomatic tensions between Qatar, the worlds largest natural gas exporter, and six Arab countries, including the United Arab Emirates and Egypt, recently came to a head over Qatars alleged support for terrorist organizations such as the Muslim Brotherhood and Hamas.
As a result, these six countries have pledged to implement a blockage on the Fujairah refueling port and ban all incoming vessels from Qaar or outgoing vessels traveling to Qatar.
Qatar produces 80 million metric tons of LNG annually, representing roughly 30 percent of the global LNG market.
So far, Qatars LNG exports havent been meaningfully impacted by the resolution, but tensions between Qatar and the six nations remain elevated, Height Securities analyst Katie Bays wrote on Tuesday.
Regardless of Qatars assurances that the blockade will not affect LNG shipments, we believe that this unprecedented blockade casts uncertainty over Qatars ability to meet summer demand requirements, Bays wrote.
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This uncertainty creates an opportunity for the U.S. to prove its mettle among risk-averse Asian LNG buyers heading into the tight summer demand season.
With the reliability of Qatars LNG exports in question heading into the summer demand season, risk-averse buyers may choose to avoid Qatar all together in 2017, Bays wrote.
So far, U.S. natural gas investors havent experienced much of a tailwind from the Qatar drama. Heres a breakdown of how some popular natural gas plays have performed in the past month:
- VelocityShares 3X Inverse Natural Gas ETN linked to the S&P GSCI Natural Gas Index (NYSE:DGAZ): +52.9 percent.
- Enstar Group Ltd. (NASDAQ:ESGR): +8.2 percent.
- Xcel Energy Inc (NYSE:XEL): +2.7 percent.
- Chesapeake Energy Corporation (NYSE:CHK): -8.0 percent.
- United States Natural Gas Fund, LP (NYSE:UNG): -14.8 percent.
- VelocityShares 3X Long Natural Gas ETN linked to the S&P GSCI Natural Gas Index (NYSE:UGAZ): -39.2 percent.
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