Seeing counterparties float 7–8% Brent slopes with partial destination flexibility for 2026–2028, but the JKM–TTF arb keeps swinging enough to make me hesitate. Are you paying up for diversion rights and wider laycans, or sticking to spot/shorts and optionality? Last week I walked from a 7.4% DES offer over a price review trigger that only kicked in at 20% deviation.
I’d take a small term slice with partial diversion but make the reopener basis-linked: trigger at about 10% JKM–TTF deviation with quarterly lookbacks instead of a blunt 20% “price review.” I’d pay about 7.3% Brent if I get +7d laycan and portfolio-limited diversions, then hedge the rest with a cheap JKM/TTF call spread — optionalities are airbags you only miss in a crash. @glopez58 would you take 7.3% with a “10% trigger,” or still stick to spot?
Quick example: I only paid up in 2026–2028 when we made diversion strictly pay‑on‑use (we set $0.15–0.20/MMBtu) and tied the reopener to a North Asia–Europe basis band of ±7% averaged over 60 days, instead of that blunt “20% deviation” you saw. One extra guardrail that helped was a year‑end true‑up that credits back part of the slope if we don’t use the flexibility. If they re-cut that “7.4% DES offer” with fee‑on‑use plus a 30‑day lookback, would you take a slice?
I’d counter near 7.3% with partial destination flex, but charge on use for diversions with a $0.15/MMBtu cap and a freight make‑whole to the base DES port; add a two‑way reopener if the Asia–Europe spread moves outside a preset range on a 60‑day average. @Priya, are you explicitly baking canal/Red Sea risk into that freight piece? Feels like paying for an umbrella only when it rains.
For 2026–2028, I’ve priced diversions as a small pre-funded bank at $0.12–0.14/MMBtu with a 50% credit back if unused, which kept the slope steady and avoided paying for optionality we didn’t use. Would you, @OP, accept “partial destination flexibility” if the reopener flips on when the Pacific–Atlantic basis drifts 9% beyond the signing band on a 60-day average instead of that far-off trigger? With 10–12 day laycans, that package has cleared for me around 7.6% without drama.
that “20% deviation” trigger is way too late; I’ve been getting a 3‑month rolling 10% trigger plus a diversion fee = min(freight delta, $0.10), which keeps the slope around 7.5 without paying for blue‑sky optionality. With the JKM-TTF whipsaw, I’d lock a small term through mid‑27 and leave the rest spot, but only with a quarterly reopener tied to the arb and a make‑whole back to the base DES port. @csmith93’s bank idea works too, but the freight‑capped fee has been simpler to audit in practice.