Options with fine print

Good morning, ladies and gents. The Gulf is busy buying itself options, and each one comes with fine print.

Our Lede this morning is the rise of QatarEnergy as a buyer of US LNG. Qatar can make LNG for roughly half the cost of many US projects, but every cargo has to leave through Hormuz, so it is buying from the producers it has long competed with: it has already signed US supply agreements and is negotiating another 3-6 mn tons a year. The market’s question is whether a portfolio of origins gives it an edge or only the look of one, since buyers now weigh a supplier’s ability to deliver alongside its price. “The industry is confusing geographical diversification with redundancy,” Mehdy Touil, lead LNG specialist at Calypso Commodities, tells us.

Adnoc is among the traders looking for a different kind of backup, in ships. It is in talks with US officials about licenses to buy or lease sanctioned tankers, alongside Trafigura, Vitol, and Mercuria, Bloomberg reports, as a shortage of vessels pushes freight rates to records and oil to around USD 100 a barrel. The Trump administration is reviewing roughly 50 applications out of about 1.6k sanctioned ships, and Energy Secretary Chris Wright calls it “converting dark tankers to legitimate tankers.” The effort only helps prices if idled ships actually go back to work, and US licenses wouldn’t override EU or UK sanctions.

On land, the GCC’s backup moved a step closer: GCC transport ministers signed the General Agreement for the GCC Railway Project in Bahrain yesterday, according to a press release. The agreement organizes rail transport across member states and supports a single interoperable network. The planned 2.1k-km railway would connect Kuwait, Saudi Arabia, Bahrain, Qatar, the UAE, and Oman, giving freight a rail route between ports on both sides of Hormuz. We looked at what a finished railway would and wouldn’t solve in our Lede last month, and we’ll have more on the signing in tomorrow’s issue.