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“In 2008, oil prices underpinned many gas contracts”
How times have changed for participants in the Brent crude market.
This week the price of Brent scrapped fresh four-year lows of around $88 per barrel as weak economic data continues to quell demand while suppliers shrug off calls to curb their output.
Apparently prices between $80 and $90 can be tolerated by the Saudis, while Kuwait’s oil minister has indicated a possible floor of $76. So by the time this column reaches a reader those fresh lows seem likely to be even lower still.
No-one is suggesting that crude is the new carbon, but it stands in stark contrast to its previous heady heights.
Flash back to mid-2008 when that same inky barrel would set you back in excess of $140. Granted this was a world where banks were still too big to fail, but the extent of Brent’s fall from influence doesn’t stop at market price.
In 2008 the price of crude would have helped to set the price for many long-term gas supply contracts and therefore the wholesale market price too. But rather than the panicked sell-off you might expect this week, the current crop of gas traders has offered a collective shrug: Brent’s not the market driver it used to be.
It’s a bit of a pity, in light of current prices ,that oil-indexed gas contracts have made way for supply deals based on the market they’re destined for.
Always the way, isn’t it? Just as you unshackle yourself from the tyranny of an overvalued commodity, it halves in price.
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