00:00What do we know about how this LNG tanker was able to get through?
00:04Did they work with the Iranians?
00:05Did they take that northern path?
00:06What do we know, and how are they doing?
00:10You know, there aren't a ton of details available.
00:12We're trying to figure it out at the moment, but they did take the northern route,
00:15which indicates that there was some sort of coordination with Iran.
00:19It is very, you know, there have been many attempts by Qatar to send LNG through the Strait of Hormuz,
00:24and you've seen, I've seen multiple ships kind of make its way towards the strait on the western side
00:29and then turn around, seemingly because they weren't able to get permission
00:33or the situation became potentially too dangerous for the ship to go through.
00:38The fact that this ship went through is quite symbolic.
00:41It's the first LNG shipment to get out.
00:43Qatar supplies 20% of global supply of LNG globally,
00:47and so this does mean something in the sense that potentially more ships could get out.
00:52There could be more easing.
00:53It's going to Pakistan, which is a big deal.
00:55Not only are they a key intermediary between the U.S. and Iran talks,
00:59but also Pakistan is dealing with an acute gas shortage.
01:02They get 99% of their LNG from Qatar last year.
01:05They've gotten basically nothing so far since the war started,
01:09so this shipment will really help them,
01:10especially as weather is going to be getting hotter over the next few weeks.
01:14That being said, it is symbolic.
01:16It doesn't really change the balance.
01:18On a normal day before the war, three shipments of LNG would go through the west to east side of
01:24Hormuz
01:24on a daily basis would be exported out of the Persian Gulf.
01:28So this one single shipment doesn't mean that there's going to be an avalanche supply.
01:32In fact, the other ships within the Persian Gulf don't really appear that they're kind of making their way
01:38to that key waterway at the moment.
01:40So we're definitely in a wait-and-see situation,
01:43but there is at least a celebration on the Pakistani side.
01:46Stephen, pull back the curtain a bit and just talk to us about how you track the movements of these
01:51ships in the strait.
01:53Obviously, this popped up based on the data that we've been going through here at Bloomberg.
01:57What gives us visibility into the movements that we're seeing in the strait?
02:00And what you mentioned that we had three ships going through prior to this crisis beginning.
02:06What are the indications going to be that we get back to kind of a more normal flow of ships
02:09here in the future?
02:11Yeah, so what's really interesting is that global ships, they have these things called AIS.
02:16Basically, we're tracking them with satellites.
02:18They send signals up to the satellites so we can see where they are.
02:22For a lot of the oil fleet, for example, ships go dark.
02:26Either if they're carrying Iranian crude or if they're going through the strait,
02:31sometimes they'll go dark to hide their position.
02:34For LNG, because of the nature of the LNG market, these ships are very expensive.
02:38And a lot of the players know each other.
02:41So there isn't much of a dark market.
02:43And so it's much easier to track LNG because the ships are large.
02:48And usually they don't turn their transmission off.
02:51Now, that being said, while this Qatari ship did go through with its transmission on, there were two ships by
02:57Adnok, which is also an LNG exporter in the Persian Gulf.
03:01They sent two of their LNG ships dark.
03:04So it actually made it's making it more difficult to track the amount of LNG ships going through.
03:09But because there are only about 700, 800 ships in the global fleet compared to thousands for oil, it is
03:16much easier to track.
03:17And we do can still see that there aren't that many going through.
03:21Now, looking at where we're going to be going over the next few weeks, it will take a while to
03:24get back up to normal LNG export levels.
03:27Even oil export levels, according to Aramco, they just had their earnings and they said the same thing.
03:32Even if there's peace, it will take months for the traffic to get back to normal, for the market to
03:38get back to normal.
03:39That's for a few reasons.
03:40One, the ships are all over the world.
03:43Two, will crews and ships be comfortable going through the strait even if there is a peace deal?
03:47Are they worried if there will be, you know, suddenly an escalation, there will be a drone going through?
03:53The risk premium in the region will always be high, will be high at least for the near term.
03:58And then lastly, for LNG, Qatar's LNG export facility in Ras Lawton was actually damaged in March by Iranian missiles.
04:0617% of its capacity is actually offline.
04:08It will take about three to five years for it to come back.
04:12So even if there were normal traffic, the ships were in the right places, LNG supply isn't going to be
04:18back to the pre-war level for years.
04:20That's exactly the question I was just about to ask you.
04:23It loaded at that facility earlier this month, but I was wondering if production, what rate production was at, but
04:29obviously you just answered that.
04:30So before we let you go, I do want to ask you about China, because crude imports fell 20%
04:35in April.
04:36That's the lowest level since 2022.
04:38About half of Chinese supply, as you know, comes from the Middle East.
04:42Talk to us a little bit about what China has done to insulate itself from this exact scenario, but it's
04:47not a perfect system.
04:47And how long can they last, given the hit to their energy supply?
04:52You know, I think China, for much of the last decade, has cared so much about energy security.
04:59And they've diversified in so many different ways.
05:02I could go, you know, we could talk for an hour about what they've done, but let's just look at
05:06oil, for example.
05:07They've actually been increasing their domestic oil production.
05:10They're also very strategic with their reserves.
05:14A lot of last year, you know, we were talking about run rates being sort of low at Chinese refineries,
05:19and yet their imports for crude were so high because they were filling up their strategic reserves.
05:24When oil in Brent was around $60, $70, the Chinese were buying.
05:28So they actually have a lot of strategic reserves there as well.
05:31They've limited the amount of fuel that they were also exported.
05:36You know, it's been going on and off.
05:37But in the early days of the war, they asked the refiners to kind of cut back on exports there.
05:43And at the same time, when you look at how they consume oil, that's also shifting.
05:48You know, this is more of a long-term story, but, you know, the EV boom and the electric truck
05:52boom, everything in China means that they're going to be depending less and less on fuel in the future.
05:57Now, in the immediate term, there are some pressure points, and I think one of them still is natural gas.
06:0230 percent of their LNG came from Qatar last year.
06:05And while the country itself also, again, like oil, is very insulated, they've got domestic gas supply, they've got inventories,
06:11they've also got pipeline imports from Russia.
06:14The LNG actually does play a somewhat key role in the Guangdong region of China, and that region is basically
06:22China's factory.
06:23It might not be well-known to the rest of the world, but it's basically – it's got the economic
06:26power of South Korea.
06:28It's huge, and because of its location on China's eastern coast, they do import quite a bit of LNG for
06:35power production as well as use in pet chems and other industries.
06:39And so if it starts to get really hot, for example, this summer, and if there's a draining of hydro
06:46facilities, then you could see a crunch in China for gas if they're not able to get what they're getting
06:51from the Middle East.
06:52Likewise also for oil to an extent.
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