LNG futures trade volumes in Q4 2023, 12.5 per cent increase for the year

LNG futures trade volumes in the fourth quarter of 2023 reached a historic peak, concluding the year on a strong note. Data from financial exchanges and brokers, as reported by S&P Global Commodity Insights, revealed a remarkable 182,971 lots traded during Q4, surpassing the previous record set in Q3 2023 at 164,748 lots. The annual LNG futures trade volumes for 2023 experienced a substantial 12.47% year-on-year increase.

Derivative contracts traded on both the Intercontinental Exchange (ICE) and the Chicago Mercantile Exchange (CME) throughout 2023 totaled 636,607 lots, equivalent to approximately 122.4 million metric tons or 1,929 cargoes. However, despite the surge in trade volumes, the open interest for LNG futures in 2023 declined by 10.6% year-on-year, settling at 935,167 lots.

In December 2023, LNG futures trade volumes exhibited a 36.62% month-on-month decrease but showed a significant 49.87% year-on-year increase. On ICE alone, December contracts totaled 41,843 lots, corresponding to around 8.05 million metric tons or 127 cargoes.

Among the monthly contracts for Q1 2024, ICE recorded the highest traded volumes at 16,297 lots, constituting 38.95% of total trade volumes in December. ICE also reported 82,575 lots of open interest as of December 29, including 82,350 lots for JKM LNG futures and 225 lots for JKM LNG Balmo-ND futures.

Asia-Pacific spot LNG prices experienced a downward trend in December due to low demand and comfortable inventories across the region. Despite a cold snap in some areas, LNG consumption did not see a significant uptick. Chinese players, in particular, showed little buying interest amid stable consumption.

However, buying interest in China emerged towards the end of December when second-tier companies re-entered the market. This resurgence was attributed to the Platts JKM, the benchmark price for LNG delivered to Northeast Asia, becoming more competitive than domestic gas prices in China.

South Korea and Japan exhibited tepid demand for spot LNG cargoes in December, influenced by comfortable inventories and a limited appetite for interbasin arbitrage opportunities. Despite the premium between Asian and Northwest Europe LNG prices staying consistent, uncertainties at the Panama and Suez canals contributed to a cautious market environment.

The LNG futures market remains dynamic, navigating various factors that impact trade volumes, open interest, and regional consumption patterns. The Q4 2023 and overall yearly increases underscore the resilience and growth potential of LNG futures trading.

(With input from ANI)