Qatar crisis sparks European gas surge, jolts Indian gas stocks

Shares of Indian gas companies, including GAIL, Petronet LNG, Gujarat State Petronet Limited (GSPL), and Gujarat Gas Limited (GGL), are likely to remain volatile on Wednesday after QatarEnergy said it has halted liquefied natural gas production following military attacks on its facilities.

The development has already triggered a spike in European LNG prices, raising concerns over supply disruptions and potential ripple effects on global gas markets.

"QatarEnergy values its relationships with all of its stakeholders and will continue to communicate the latest available information," it said in a media release.

The price of Dutch TTF Natural Gas futures has seen a significant increase after the announcement. 

European gas price surge and Indian stock volatility

On Monday, the European gas market experienced its most aggressive movement, with the Title Transfer Facility (TTF) price spiking by as much as 54% at one point.

Following a 39.26% surge on Monday, the Dutch TTF futures extended their gains on Tuesday, quoting at 57.595 euros, which marks a 29.4% increase.

Intraday, the increase peaked at 32%. Futures are currently trading near their 52-week high. 

Meanwhile, shares of Petronet LNG closed 4.6% lower at 308.65 INR on Tuesday, while GAIL experienced a drop of 2.6% to end at 165.07 INR. 

The market remains focused on the escalating risk in the Middle East. 

While worries persist regarding oil transit through the Strait of Hormuz, a more significant threat to the market involves Iran targeting other energy infrastructure in the region, which could result in more extended supply disruptions.

“Also, the market appears to be pricing in a relatively short-lived disruption to oil flows through the Strait of Hormuz, which the large surplus markets expect this year should be able to absorb,” Warren Patterson, head of commodities strategy at ING Group, said in a note. 

The US, through Secretary of State Marco Rubio, is scheduled to announce measures on Tuesday aimed at easing elevated energy costs. 

However, current reports indicate that the US does not have an immediate plan to tap into its strategic petroleum reserve.

Coordinated emergency oil releases from multiple nations are increasingly probable should the Middle East disruptions persist.

Global supply risks and Indian gas companies’ exposure

The fact that roughly 20% of the world's LNG trade passes through the Strait of Hormuz represents a significant risk to global gas markets.

“Though plant operations would have had to be scaled back regardless, should vessel flows through the Strait of Hormuz persist,” ING’s Patterson said. 

The gas market was susceptible to a more significant spike because of a tighter market. 

“This is because the global LNG market and EU gas storage are relatively tight, and Qatari LNG faces significant supply risks,” Patterson added. 

Indian oil companies have reportedly cut natural gas supplies to industrial users by 10-30%.

This reduction is a precautionary measure taken in anticipation of a tighter supply market, following the halt in production by Qatar, a major Middle Eastern producer. 

According to a January note by Nomura, Petronet LNG has an existing LNG contract of 7.5 million tonnes per annum (mpta) with Qatar Energy.

GAIL also has an existing contract of 1 mpta with the same LNG supplier. 

Additionally, GSPC, which is the parent company of GSPL and Gujarat Gas, has an existing contract for 1 mmtpa with Qatar Energy.