Platts JKM futures traded volumes reach 3-month high in Jan amid peak heating demand

The Platts JKM LNG derivatives market started the new year on a strong note with the traded volumes recorded on the Intercontinental Exchange reaching a three-month high in January, according to exchange data, amid peak heating demand.

The JKM LNG futures and Balmo-ND futures traded volumes cleared on ICE in January totaled 73,576 lots, up 75.84% month on month and 80.83% year on year. This was equivalent to approximately 14.15 million mt, or 223 cargoes.

The traded volumes in January reached nearly those in October 2023 when they were at a one-year high of 75,104 lots.

Meanwhile, the open interest for the JKM LNG futures and Balmo-ND futures reached an eight-week high of 91,673 lots standing across the Intercontinental Exchange as of Jan. 31.

In January, about 91,198 lots of open interest for JKM LNG futures were recorded and 475 lots of open interest for the JKM LNG Balmo-ND futures.

Market participants were actively trading amid the peak winter season, with many using the JKM benchmark in their physical and derivatives positions, sources said.

Demand for spot LNG cargoes emerged from price-sensitive Asian buyers, as spot LNG prices were lower compared with December 2023.

The Platts JKM, the benchmark price reflecting LNG delivered to Northeast Asia, was mostly rangebound at around $9-$10/MMBtu level in January, except on Jan. 26 when it reached a multi-month low of $8.909/MMBtu, S&P Global Commodity Insights data showed.

The price was down from a level of around $11-$12/MMBtu in December 2023 and $20/MMBtu across January last year, the data showed.

The market saw several Chinese buyers procuring LNG cargoes for delivery from end-January to early March following the sharp decline in Asia-Pacific spot prices in early January, according to various sources.

"The Chinese buyers bought due to the positive price arbitrage between the international and domestic prices," a market source said.

Indian and Bangladeshi companies were also active in the market, issuing over 15 tenders throughout the month.

Market participants also noted that the mild winter temperatures and comfortable inventories across the Northeast Asian region outweighed the ongoing geopolitical risk related to the Red Sea, lending downward pressure on the spot prices in Asia.

The US-Asia arbitrage for Atlantic LNG volumes into Asia presented little options for traders to engage in inter-basin trades in January, as the Cape of Good Hope became the sole possible route amid the attacks in the Red Sea and continued tightened restrictions at the Panama Canal, according to an analysis of market data and industry feedback.

As of Feb. 2, the arbitrage window between the US and Asia remained shut, with the second-half March JKM/H1 March NWE spread against the US Gulf Coast-to-North Asia/Northwest Europe freight rate marked at minus 56 cents/MMBtu, calculated based on rerouting via the Cape of Good Hope, S&P Global data showed.