LNG Market Faces Disruption as Red Sea Closure Forces Risky Detours

The last LNG carrier that passed the Bab el Mandeb strait off the Yemeni coast did so in February. Since that month, there has been no LNG traffic via the once major energy chokepoint as vessels diverted around Africa—or changed destinations entirely. When the Houthi attacks on ships traversing the Red Sea prompted the redirection of maritime trade in the area, multiple analysts tried to gauge the significance of the events.

According to Bloomberg, the solution in such situations involves cargo swapping, with U.S. producers sending their own LNG to Europe and buying other, likely Middle Eastern, cargos for their clients in Asia, for instance, to fulfill their contractual obligations. This appears to be the new normal for LNG exports since it does not look like the Houthis are about to stop shooting at ships in the Red Sea. For now, the situation appears to be relatively easily manageable.

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