LNG: Qatar Begins Work to Resume LNG Exports

Oil/gas terms of trade dynamics have been key to G10 FX market’s reactions to the war in the Middle East, though haven/risk proxy characteristics have been prevalent in some instances.

• The first chart below plots G10 economies’ dependency on oil and gas (2024, relative to Total Energy Supply, TES) against their oil and gas trade balance (vs TES). It isolates the United Kingdom, Japan and the Eurozone as most exposed to oil/gas flow disruptions and/or energy market price changes. These economies are net oil/gas importers and have a high reliance on oil/gas for their total energy supply.
• The second chart plots the oil and gas trade balance (% TES) against the FX market reaction in USD pairs since February 26 (DXY is used for USD). Of the net energy exporters, only the USD (geopolitical safe haven) and CAD (terms of trade and beta to the USD) have performed resiliently over this period. NOK and AUD’s relative underperformance reflects their sensitivity to the broader risk environment, and likely positioning unwinds in recent sessions.
• Of the net energy importers, the risk sensitive SEK and EUR have weakened most notably. Separately, we noted last week that GBPUSD was at an inflection point from a technical standpoint, with natural gas prices a key consideration ahead.

We expect the G7 Finance Minister call on a possible oil stockpile release (in concert with the IEA) to begin in just over 30 minutes. 

• Consensus appears to be coalescing around a stockpile release of between 300-400mln bbls - representing as much as 30% of IEA stockpiles, which could represent a release of twice the size of that seen in 2022 (where 183mln bbls were released across two phases). The report has helped temper the rally in crude, with Brent crude futures 12% off the overnight high of $119.50/bbl.
• It appears the meeting will work toward uniform approval of a stockpile release - but this should not prove too difficult given the IEA's statement last week that they were "ready to act". The magnitude of the oil rally over the past week has outstripped that seen in early 2022 at the onset of the Ukraine War - an event that helped trigger two separate IEA stockpile releases.   
• The longer-term impact of a crude release is less clear - a stockpile release of that size will take time to fully reach markets, and the longer the Strait of Hormuz is shuttered, the faster the oil market deficit grows. Citi analysis sees closure of Hormuz cutting off 16mln bbls per day from global markets - meaning a 30% stockpile draw compensates for just three weeks of closure of the Strait.

Schatz Block trade, suggest buyer:

• DUM6 11.9k at 106.185.