The ‘Armageddon scenario’ for gas markets

0:00Today's markets move fast. Get the insights you need in 10 minutes with the Barclays Brief, a new podcast from Barclays Investment Bank. Through sharp dialogue and scenario based analysis, our leading experts analyze key market themes each week. So whether you're managing a portfolio or leading a business, the Barclays Brief podcast can help you make smarter decisions today. Stay sharp. Stay briefed. Find Barclays Brief wherever you get your podcasts.

0:32Good morning from the Financial Times. Today is Friday, March 20th, and this is your FT News Briefing. The global energy crisis is getting worse after a massive attack in Qatar. Plus, amateur traders are turning to five-minute bets. The people that the prediction markets are pulling in or that they're advertising to are looking to make bets that sort of resemble, you know, a roulette game. I'm Mark Filippino, and here's the news you need to start your day.

1:09European gas prices surged after Iran struck an industrial facility in Qatar yesterday. It supplies a fifth of the world's liquefied natural gas. Now, to give you an idea of how important it is, stocks and bonds tumbled yesterday while Brent crude at one point jumped above$115. a barrel. This scenario was so bad that one analyst described it as Armageddon for the industry. Central banks are worried too. The European Central Bank said yesterday it might raise rates at its next meeting over the threat of rising inflation. Now, U.S. markets did stage a late rally. They got a boost after Israel's Prime Minister Benjamin Netanyahu said a separate round of strikes on Iran eliminated its ability to enrich uranium and to produce ballistic missiles.

1:56Netanyahu said he now sees, quote, this war ending a lot faster than people think. But the attacks on Qatar could have lasting impacts on global energy. Here to explain is Malcolm Moore. He's the FT's energy editor. Hi, Malcolm. Hi, Mark. So, Malcolm, tell me a little bit about this LNG site in Qatar and why it's so vital to global supply. Okay, so imagine an industrial site that is three times the size of Paris, and then imagine that on that site, there are 14 huge units, factories that basically spend all their time compressing gas into a liquid so it can be exported from Qatar to the world.

2:37Also on the site, there are petrochemical facilities, refineries. There's loads of stuff there. I mean, it's basically one of the most important energy hubs in the world. Raslefan, industrial city, they call it in Qatar.

2:50Marc Filippino: Massive. Three times the size of Paris. Do we know how badly it was hit yesterday? Well, yesterday was part of a series of escalations. What happened was Israel bombed some Iranian gas fields. They took out something called Safpaz, which is the sort of backbone of Iran's domestic gas industry. And so then immediately Iran said, okay, you've escalated, we are going to escalate, we're going to fight back. What we know is that there were five ballistic missiles fired at Ras La Fan on Wednesday, and four of them were intercepted. One of them hit. It caused an explosion. Satellites picked up the heat signature.

3:30It basically looked like just a huge industrial disaster. And then overnight, they fired some more, and those hit the liquefied natural gas plants themselves. Two of those units got taken out.

3:42Marc Filippino: We knew last week that the facility stopped production as a precaution. Now, with this damage, how long could it take to bring production back online? So we spoke to the Qataris just after they took the plant offline last week. They said it would take weeks or months to bring it back online after the war finished. But everybody was expecting that when this conflict ends, the gas will start flowing again relatively quickly. What we now know and what the Qatari said on Thursday is that it will now take three to five years to fix the damage that has been caused. That's incredible. Three to five years is a terribly long time to wait for something so important to the energy sector.

4:25Marc Filippino: What parts of the world will this affect most? So almost all of Qatar's LNG goes east to Asia. You know, China is a big buyer. Japan, South Korea, India, they're all big buyers. smaller places like Taiwan. So they're all affected. But actually, you know, gas is a global market. If there's no Qatari gas going to Asia, then Asia will buy from somewhere else. And that somewhere else is likely to be the US. And that means that US gas is going to flow towards Asia rather than towards Europe and prices will go up. They're now at a level where some countries just aren't going to buy the gas because it's too expensive for them.

5:03One analyst we spoke to basically said that the world is going to split into the haves and the have-nots, the people who can afford gas and the people who can't. What would that do to alternative sources of energy? Would we see a pivot to things like renewables or even coal? Yeah, absolutely. So, I mean, the first thing to say is that people working in the energy sector keep telling me that we are underestimating how long the impact from this conflict is going to be. I think governments are going to want to diversify away from oil and gas, not just for the economics, but also for security of supply.

5:41And they're looking at renewables. The countries that can and have the land and space to be able to build renewables, I'm sure they're going to be building more renewables. And the big winner is definitely coal. You know, coal is cheap. Lots of countries have steady and secure supplies of coal. They had begun to switch away from it because of climate concerns and now thinking, well, actually, maybe we'll switch back to coal.

6:04Marc Filippino: Malcolm Moore is the FT's energy editor. Thanks so much, Malcolm. Thank you.

6:37$70 million in trading volume across the two biggest prediction market platforms in the world, Polymarket and CalSheet. The FT's Sam Lerner is here to discuss the mania these five-minute bets are driving in the crypto markets. Hey, Sam. Hey, Mark. So, Sam, how popular have these bets become? They've become very popular on the two platforms. So the five-minute variety is only on Polymarket, But both Polymarket and Calci launched a 15-minute crypto market at the end of last year. And they've sort of steadily grown in volume. So at this point, they attract about$70 million in trading volume across the two platforms every day.

7:17And they make up about half of the crypto trading that occurs on these platforms. And that crypto trading itself has grown into one of the biggest categories that people are trading on on these prediction markets.

7:27Marc Filippino: Now, what's the appeal of this type of betting? How much can someone make on one of these five or 15-minute bets? Yeah, so the crypto trading that happens on prediction markets is futures trading. So they're not trading on the cryptocurrencies themselves. They're trading on what they expect the price to be down the line. And this allows traders to really leverage some very small price changes. So, for example, if the price of Bitcoin increased by 0.1 % in 15 minutes and I owned Bitcoin, I could make a 0.1 % profit off of that. But if I bet that Bitcoin will go up, I could double my money in 15 minutes.

8:08Of course, I could also lose all of my money in 15 minutes. So it's really highly leveraged and very risky, even relative to trading cryptocurrencies, which is, of course, already very volatile.

8:20Marc Filippino: Yeah, it does sound high risk, high reward. Who does this appeal to? We don't know specifically who traders are, but we're seeing a lot of interest in markets that have high volatility and have a high number of scheduled events. The two categories sort of dominating prediction markets right now are sports trading and increasingly crypto. These are both categories that have a lot of markets attached to them where you can trade on them very frequently and try to compound your returns very quickly and turn around and reinvest those winnings. Sam, you report on prediction markets quite a bit for the FT.

8:57Marc Filippino: What does this new craze tell you more broadly about these markets and the fast-growing popularity that we're talking about here? These prediction markets like to tell a particular story about the kind of trading that goes on on their platforms and the social utility of it. And they talk a lot about culture markets and election markets and markets on federal funds rates, the kinds of things that may have some more informational value. But what we've seen more and more is betting volume on, as I said, things like sports and crypto that looks a lot closer to betting that we see on traditional sportsbooks, sort of traditional gambling.

9:39And there's a lot less interest in sort of the high-minded prognosticating or what the prediction markets will sometimes call the truth machine. And a lot more interest in people just making a quick return and a lot less informed by any sort of underlying knowledge on the topic.

9:56Marc Filippino: Sam Lerner is a graphics journalist on the FT's visual storytelling team. Thanks so much for your time, Sam. Thanks, Mark.

10:09Before we go, energy has been the big story since the war in Iran began. And as we heard from Malcolm Moore earlier, there are real fears about a long-term energy shock. So while the world looks for direction about what happens from here, some of the biggest names in the energy industry are gathering next week for an annual conference in Houston, Texas. How about that for timing? Victoria Craig, who hosts the Monday edition of The Briefing, is here now to talk about what we can expect. Hi, Victoria. Hey, Mark. So this seems to be a who's who of the industry, yeah? Yeah, it really is. So this event is going to be hosted by S &P Global, and we're going to see prominent energy industry executives who are lined up to speak next week.

10:51And they include ones from Total, Chevron, Aramco, Shell, ConocoPhillips, Abu Dhabi National Oil Company, or ADNAC, and plenty of others from the industry. We're also going to get to hear from some of the Trump administration's leaders, including Energy Secretary Chris Wright, as well as the Secretary of Interior and head of the Environmental Protection Agency. It's also, I should say, not just limited to the energy industry. It also loops in tech and finance. We're going to have Ruth Porat, who is the president of Alphabet, and Brad Smith, who is the president of Microsoft. And there is obviously plenty to talk about right now, given the war going on in the Middle East.

11:30What's actually on the agenda for next week, though? Yeah, well, fittingly, the theme is convergence and competition, energy technology and geopolitics. So the focus is slated to be on how to marry energy expansion with sustainable growth. That's a theme we've seen for many years now. Also, how AI is working its way into the energy industry, but more importantly, how geopolitics and economic competition have really frayed alliances and fractured supply chains. And what I found really interesting is there's one session that's going to focus on LNG and how it's become deeply ingrained in global energy supply chains, it's hard to imagine that this week's Iranian attacks on facilities in the Gulf will not also be a topic of conversation next week.

12:14That's the FT's Victoria Craig. Thanks so much, Victoria. Thanks, Mark. You can read more on all these stories for free when you click the links in our show notes. This has been your daily FT News Briefing. Check back next week for the latest business news. The FT News Briefing was produced this week by Julia Webster, Safiya Ahmed, Sonia Hudson, Fiona Simon, and Victoria Craig. I'm your host and editor, Mark Filippino. Our show is mixed by Alex Higgins, Kelly Gary, and Kemp Militzer. We had help this week from Peter Barber, Michael Lello, David Da Silva, and Gavin Kallman. Our executive producer is Topher Forges.

12:46The FT's global head of audio is Cheryl Brumley. And our theme song is by Metaphor Music.

13:05We'll see you next time.

13:26to final review, your work is grounded and ready. LexisNexis Protege Workflows. Greater Certainty. Private. Secure. Authoritative Legal AI.

13:37Marc Filippino: Self-directed investing. Trading. Full-service wealth management. Automated investing. Financial planning. Thematic investing. Retirement planning. And to think, that's just a small taste of what Schwab offers. Because Schwab knows that when it comes to your finances, choice matters. No matter your goals, investing style, life stage, or experience, Schwab has everything you need all in one place, so you can invest your way. Visit schwab.com to learn more.