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Tricks of the trade, by Jillian Ambrose

“The rules have changed in a world of bargain Brent”

When a butterfly flaps its wings in the Middle East, it seems there’s no part of the world that won’t feel the hurricane.

For months, the wider energy markets have felt the aftershock tremors of the Opec-triggered global oil crash with falling prices and shifting economics for project developers. But this week brought to light a new consequence: a deluge of liquefied natural gas into the UK.

Good news for anyone with a relatively unhedged forward position. Less so if you’re lobbying government on the need to counter import scarcity with gas storage projects – or if, like Centrica, you locked in a £4.4 billion LNG supply deal with Qatar in a vastly different price environment.

For the better part of half a decade, the UK has scrambled to attract LNG cargoes, usually securing long-term contract cargoes only in the so-called “shoulder months” of spring and autumn when Asian demand wanes. The rules were clear: if anyone was guaranteed cargoes in a competitive global marketplace, it was Japan. After all, Asian countries – including Japan, Korea and China – don’t balk at the oil-indexed price tag attached to LNG, and this premium over hub-based European prices mean they’ll always take precedence.

But the rules have changed in a new world order of bargain basement Brent. Now, the same oil-indexed contracts which used to hold Asian pricing levels aloft have brought the opposite amid lower Asian demand overall. It’s the UK offering an attractive delivery market – and the volumes are flowing in.