The LNG Squeeze Play Is Now On

The Russian Transport Ministry came out with a much aggrieved statement, which said the blacklisted Russian tanker had been hit by Ukrainian drones fired from Libya. They offered no proof of that accusation, and the Ukrainians are neither confirming nor denying a kill, but Ukrainian involvement in the attack is the foremost theory at the moment.

...Russia's transport ministry said the tanker, which had been carrying LNG from the Arctic port of Murmansk, was attacked by Ukrainian naval drones launched from the coast of Libya.

It said the 30 crew members, all Russian nationals, were safe, and thanked Maltese rescue services.

"We qualify what happened as an act of international terrorism and maritime piracy, a gross violation of the fundamental norms of international maritime law," the ministry said.

The squawking about terrorism from the Russians is pretty rich if it were the Ukrainians, all things considered. But the Russians do have the victimhood thing down pretty pat even when they're the ones standing in a pile of bodies with a knife dripping blood.

The Russian LNG tanker that blew up was one of the few they have that can take the 'northern route' to China, which imports quite a bit of Russian natgas, both via pipeline and through LNG deliveries by ship.

...In 2024, Russia was China's largest source of imported natural gas (pipeline and LNG combined). Russian imports made up approximately 10% of China's natural gas use in 2024, up from 3% in 2020. Russian imports are transported mainly by pipeline, particularly via the China-Russia Natural Gas Pipeline Eastern Route, also known as Power of Siberia 1

The situation with the Strait of Hormuz being virtually choked off by the wartime insurance cancellations has already cut Russian deliveries to China by some 30%. The workaround had been to utilise these other tankers to, essentially, 'take the long way home' in order to keep some LNG flowing to China besides the pipelines.

Wow. This sanctioned Russian LNG tanker was likely China-bound, and given the effective closure of the Straits of Hormuz (choking off 30% of China’s LNG imports) this a particularly seismic geopolitical development. https://t.co/yI9eEDIAfc

— Peter Meijer (@PeterMeijer) March 3, 2026

The crafty Ukrainian attack smack in the middle of the Med has now thrown that plan all into chaos, as it means there is nowhere safe for Russian fossil fuel shipping, with China as their biggest consumer.

This, as you can imagine, also hits Russia square in the pocketbook, hence Putin's sabre-rattling about terrorists. He's also threatening to look for other markets to take his natgas to because he is in a froth about most of Europe falling in line behind the American and Israeli action in Iran, another client state now lost to him.

➡️ The only Russian gas that could be redirected from Europe to elsewhere would be volumes from Yamal LNG.
➡️ The EU took 93% of Yamal LNG volumes in January.
➡️ The only Russian pipeline gas still going to Europe is that via TurkStream Line-2, which can't be redirected to… https://t.co/YALXyB63kG pic.twitter.com/Yjev3aU6XM

— Russian Oil & Gas Monitor (@RusOilGasExpert) March 4, 2026

But he does still have a war to finance and a crumbling economy.

What's a dictator to do when his options are being carved away?

Perhaps sit tight and wait for events to give him a bit of a break, as they seemed to have yesterday, even with the tanker still belching flames in the Med.

In a surprise move that sent natural gas prices, already up 25% thanks to the fighting, soaring again yesterday, the Qataris closed their LNG export plant (only the world's largest, mind you). Suddenly, Europe is scrambling, while lighting candles to thank God that it's almost spring and about to warm up.

Europe faces its biggest energy crisis since Russia's invasion of Ukraine in 2022 🚨

Qatar shut production at the world's biggest LNG export plant after an Iranian drone attack. That facility produces ~20% of global LNG supply

Europe will need to compete with Asia for LNG pic.twitter.com/R7XQKKo89Z

— Stephen Stapczynski (@SStapczynski) March 2, 2026

The Europeans are fit to be tied, and there is no way the United States can make up the difference.

European Gas Prices Soar After Qatar LNG Halt Jolts Market

‘This is the biggest threat to world gas markets since Russia invaded Ukraine in 2022,’ ANZ says

European natural gas prices surged nearly 40% Tuesday after a production halt at the world’s largest liquefied natural gas export facility in Qatar rattled markets, stoking concerns over global supply.

The Dutch TTF front-month contract jumped 38.9% to 61.77 euros a megawatt-hour in afternoon trading, the highest level since early 2023.

State-owned QatarEnergy halted production of aluminum and several chemicals a day after an Iranian strike forced it to shut off production at the Ras Laffan complex, the world’s largest liquefied-natural-gas export facility.

“This is the biggest threat to world gas markets since Russia invaded Ukraine in 2022,” analysts at ANZ said.

Qatar is the world’s second-largest LNG exporter. It mainly supplies customers in Asia, though any prolonged outage would likely force European and Asian importers to compete for limited spot cargoes, pushing prices higher in both regions.

The disruption came as the market was already grappling with the effective closure of the Strait of Hormuz, a critical shipping route at the mouth of the Persian Gulf handling more than 20% of the world’s LNG supply.

The timing is particularly sensitive for Europe. With the heating season nearing its end and inventories well below seasonal norms, the region will face mounting pressure to rebuild storage ahead of next winter.

Alternative supplies, meanwhile, remain limited. While the U.S. could boost exports, traders say additional volumes wouldn’t be enough to offset prolonged losses of Qatari output.

Who else does the Qatari closure hurt?

China again, along with India, South Korea and Pakistan.

Everyone's in a panic, looking for alternative resources to tide them over.

Asian liquefied natural gas soared to the highest level since 2023, as the Middle East conflict forced a shutdown at the world’s largest export plant in Qatar and halted shipping through the Strait of Hormuz.

...Qatar produces about a fifth of the world’s LNG and much of it goes to Asian buyers including China, India, South Korea and Taiwan. These importers are now rushing to find alternatives as concerns rise over prolonged disruptions.

...One immediate impact “would be cargo competition between Europe and Asia” as shipments are often redirected to higher-paying markets, said Evan Tan, an LNG analyst at ICIS. As both European and Asian prices rally, traders are watching price spreads to see which region might be more profitable.

It's going to be big dogs, China and India dukin' it out.

...China and India are set to take the biggest hit from Qatar’s shutdown because of their exposure, and these countries may switch to alternatives such as coal instead of procuring expensive spot cargoes at a premium, Tan said. In the long run, the fallout may push companies to “rethink their portfolio diversification strategies,” he added.

How important is Qatari natgas to China?

...In 2022, Qatar was China’s second-largest LNG supplier, delivering 24.8 billion cubic meters (bcm) or 18 million tons, which accounted for 26.6 percent of China’s LNG imports (Figure 1) and 16 percent of China’s total natural gas (pipeline and LNG) imports (Figure 2).[4] China was Qatar’s largest LNG buyer, accounting for 21.7 percent of Qatar’s exports (Figure 3).[5]

So if one is inclined to start doing a little math and tot up the percentages of LNG imports that China is currently looking at being cut off from, thanks to Ukrainian drone attacks and the Iranian military action, it seems it could be a pretty substantial chunk of what they need.

Qatar is 26.6% of their imports, and in January, Russia's LNG shipments to China broke records.

China imported record volumes of liquefied natural gas from Russia in December, up from the previous record set the month prior, and more than double the estimates from ship-tracking services. 

China’s LNG imports from Russia hit 1.9 million tons last month, according to official customs data cited by Bloomberg on Thursday. That’s higher than the 1.6 million tons of Russian LNG imported in November, which was also a record. The officially reported volumes in December are more than double compared to 850,000 tons estimated in ship-tracking data compiled by Bloomberg. 

The reason for the huge difference wasn’t immediately clear, but analysts have offered several possible explanations, ranging from an uptick in winter gas demand in China, to discrepancy between cargo arrivals and customs clearance, and, of course, the shadow trade of sanctioned Russian LNG volumes making their way to China. 

If more cargoes of the shadow fleet have switched off transponders or faked positioning and routes, ship-tracking services may have missed a lot of LNG cargo traffic bound for China. 

Even in the winter, Russia is keeping its sanctioned LNG trade with China alive, thanks to an ice-class vessel capable of ploughing through the thick Arctic ice.

Early this month, the sanctioned Christophe De Margerie ice-class LNG tanker was set to export its third cargo since December 20 from the Arctic LNG 2 project in Russia, which is under sanctions by the United States, the EU, and the UK.  

These 'ice-class tankers' must be the 'capable of the northern route' tankers that were referred to in my opening.

They don't have many of these, and now they have one less. They also now have to worry about losing more in formerly friendly waters.

Well...huh.

China will be up against an India looking for LNG deliveries that has already declared natural gas rationing, so Modi and Co will be coming to the table ready to play. Where the Indians and Taiwanese will have an advantage in the LNG market, besides the ability to pay the market rate, is that Americans are shipping LNG out as fast as they can fill a boat.

 India began rationing natural gas on Tuesday while countries around Asia looked to the spot market to replace supplies, activated emergency plans and prepared to step up production, as the conflict in the Middle East curtailed shipping and halted Qatari output.

Government officials and company executives in Japan, Taiwan, Bangladesh and Pakistan said they did not expect an immediate impact as some cargoes due this month had already arrived, but they would diversify their import sources and buy liquefied natural gas (LNG) from the spot market if the war drags on.

LNG buyers in Asia account for more than 80% of shipments from Qatar, the world’s No. 2 producer after the U.S., according to data from analytics firm Kpler.

In India, gas firms on Tuesday reduced supplies to companies in anticipation of tighter supply from the Middle East after Qatar halted production, Reuters reported.

Taiwan, which generates more than 40% of its electricity from LNG and imports a third of its supply from Qatar, will buy more from the U.S. and could coordinate with South Korea and Japan if a shipping blockade stretches on, its economy ministry said on Tuesday.

I do not believe the Chinese will have head-of-the-line privileges.

Again, this is where chanting the mantra has paid off both in saving our collective butts from the same disruptions and in what should be boom times for American businesses.

DRILL, BABY, DRILL

On the other hand, the Russians, and especially the Chinese, are finding themselves in the middle of a squeeze play.

I'm sure it was all a coincidence how everything came together.

Pretty sure, anyway, cuz...you never know.