THE sanctions imposed by the four Arab states on Qatar could continue for much longer, with a minister from the United Arab Emirates (UAE) saying on Friday that the move appears to be effective in pressuring Qatar to act on their demands.
But even a prolonged diplomatic crisis in the Gulf would probably not have much impact on the oil and liquefied natural gas (LNG) markets, say energy analysts.
UAE Energy Minister Suhail bin Mohammed al-Mazroui, in a press conference held in Singapore on Friday, said: “We have seen that when we try to apply pressure on Qatar, there has been some good news.”
Qatar on July 11 signed an agreement with the United States aimed at combatting the financing of terrorism. The country’s emir had on Thursday issued a decree amending some provisions of a law to combat terrorism. Referring to these, Mr Mazroui said: “These are good steps but our issue with Qatar is an issue of trust, so we need to continue monitoring (its behaviour).”
Saudi Arabia, Bahrain, the United Arab Emirates (UAE) and Egypt imposed sanctions on Qatar last month, saying the gas-rich Gulf state finances extremist groups, an allegation Doha denies.
UAE will continue these “until they (Qatar) become reasonable”, said Mr Mazouri. “If it takes longer, that’s fine for us because we think it’s necessary to protect our countries and our people.”
Asked whether they will widen the current sanctions against Qatar, he replied that the four countries will not do anything outside of the boundaries of international law.
Energy analysts told The Business Times that a prolonged diplomatic crisis should not have much impact on the oversupplied oil and liquefied natural gas markets. Even though shipping logistics were initially affected in the first few days of the rift, traders have found ways to get around these, they said.
OCBC commodities economist Barnabas Gan noted that Qatar produces only about two per cent of Opec’s total oil production and exports, and therefore does not have much influence over oil prices.
Even in the LNG market, a product for which Qatar is the largest exporter in the world, the effect of the rift has been negligible.
Mr Gan said: “Qatar’s revenue from LNG exports are reportedly intact, despite the current diplomatic row, given that Qatar’s LNG exports are mainly delivered to Asia (72 per cent of total LNG exports) and Europe (23 per cent), while the country sends a small amount of natural gas via the Dolphin Pipeline to the UAE and Oman.
“In actual fact, natural gas prices have picked up since the start of July, suggesting that the initial concerns over the boycott were short-lived.”
But if the conflict were to intensify and result in a blockade of the Strait of Hormuz, through which Qatar’s energy exports pass, this would have “grave consequences” for both crude oil and LNG prices, he said.
Mriganka Jaipuriyar, S&P Global Platts associate editorial director of energy news and analysis for Asia and the Middle East, concurred that the impact of a prolonged rift would be limited.
She said that one of the most significant effects on the oil market thus far was the confusion in the initial days of the diplomatic spat over the restrictions on Qatar-linked ships from refuelling at Fujairah, a bunkering hub within the UAE. With the UAE port authority eventually clarifying that the curbs would affect only vessels flying the Qatar flag or those owned by Qatari nationals, this has been resolved.
Unless the four countries were to take more drastic steps that lead to confusion again, it will most likely be business as usual in the oil trading markets, she added.