ICE to start trading first U.S. LNG futures contract

ICE to start trading first U.S. LNG futures contract

Intercontinental Exchange (ICE) will begin trading a first-ever U.S. LNG futures contract in a response to the growing U.S. LNG export volumes.

The ICE LNG futures contract will be cash settled against the Platts LNG Gulf Coast Marker (GCM) price assessment and it will use Platts-derived U.S. GCM LNG forward curves for daily settlement purposes. The curves will have an initial tenor of 48 months.

Speaking of the U.S. LNG futures contract, J.C. Kneale, vice president, North American power and natural gas markets, ICE, said, “by providing the marketplace with a U.S. Gulf Coast LNG futures contract, along with the prospect of future additional products, domestic and international market participants now have a risk management solution that lays the foundation for a more effective means of hedging their spot and forward exposure, which will be particularly useful as the global LNG market continues to evolve and grow.”

According to S&P Global Platts, the increased exports of U.S. LNG has positioned the United States to play a new primary role in the global natural gas and LNG markets.

LNG exports are becoming an increasingly important market driver in the U.S. natural gas markets, with a new focus toward LNG values at the U.S. Gulf Coast, the country’s heaviest concentration of liquefaction plants and largest storage hub for export-bound natural gas.

Kwhame Gittens, manager, commodity risk solutions (Americas), S&P Global Platts, said, “additionally, the optionality, transparency and freedom of a U.S. LNG cargo are nearly unparalleled in global markets, offering real opportunities for participation in this emerging spot market by financial markets, traders and other interested stakeholders.”

Shelley Kerr, global director of LNG and regional director of generating fuels & electric power, Europe, Middle East and Africa (EMEA), S&P Global Platts added that the over the past couple of years there has been an exponential growth in Asia-based LNG swaps.

“Counterparties are demanding that the new flexible supply from the U.S. is underpinned by both price transparency and the means to hedge,” Kerr said, adding that in any such evolution, transparency will be crucial to the development of the LNG market and that the U.S. Gulf Coast is “become a key anchor for LNG prices.”

According to the latest S&P Global Platts research, natural gas producers, plagued by low domestic prices in recent years, are eager to sell into the international marketplace through LNG. The natural gas infrastructure that intersects the United States, Mexico and Canada is the world’s largest and most integrated natural gas market and by 2020, the Americas region is expected to be the world’s third largest producer of LNG, behind Australia and Qatar.

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