JKM LNG July futures traded volumes down 6.84% on month; open interest steady

Traded volumes for the JKM LNG futures cleared on Intercontinental Exchange in July fell slightly by 6.84% month on month and rose 19.12% year on year to 68,536 lots.

This is equivalent to approximately 13.18 million mt, or 208 LNG cargoes.

JKM LNG balance-month next-day futures continued to see steady activity, with traded volumes reported during the Platts derivatives Market on Close assessment process totaling 2,152 lots in July.

Open interest for the JKM LNG futures and JKM LNG balance-month next-day futures reached 110,890 lots across the ICE as of July 31, according to exchange data.

This is up slightly from 110,283 lots in June.

Some 109,140 lots of open interest for the JKM LNG futures and 1,750 lots of open interest were recorded for the JKM LNG balance-month next-day futures.

Meanwhile, the margin rate for the front-month September JKM contract was reported at $11,244 as of July 31, according to ICE data.

This is down 10.97% from $12,630 reported on June 30.

Asian LNG spot prices remained below $12.30/MMBtu in July, driven by ample supply of cargoes, with traders bringing more US shipments for August delivery into the market due to open arbitrage opportunities, alongside relatively muted demand.

The Platts JKM, the benchmark price reflecting LNG delivered to Northeast Asia, fell month on month, with the average JKM price in July at $12.158/MMBtu from $12.578/MMBtu in June.

Buying interest

The more affordable LNG spot prices in July attracted end users from South Korea and China, who took advantage of the lower prices to replenish inventories with August and September shipments. More than 10 cargoes were traded bilaterally during the first half of July, as these buyers sought to procure LNG at favorable rates.

Notably, buying activity in Japan was prompted by a spike in power demand in early July amid intensely hot weather, depleting LNG inventories nationwide.

Despite a spike in power demand in Japan in early July, buying interest for LNG cargoes by Japanese buyers was limited as utilities stocked up beforehand, according to market sources.

Moreover, market sources noted that other parts of Asia saw a lack of buying interest, with the Southeast and South Asian regions experiencing monsoon effects and high Asian LNG spot prices curbing buying interest from price-sensitive Chinese importers.

Supply-side uncertainties emerged after the Freeport LNG facility in Texas was shut down on July 7, a day before Beryl made landfall in the state.

Feedgas demand at Freeport has steadily increased since mid-July as repairs were completed after sustaining hurricane damage to its fin fan air coolers.

Arbitrage opportunities in second half of July were sparse amid narrower spot LNG price spreads between Europe and Asia, providing traders with few opportunities to bring US cargoes to Asia.

Platts, part of S&P Global Commodity Insights, assessed the East-West arbitrage at minus 28.1 cents/MMBtu on Aug. 5, taking into account the H1 Octrober JKM/H1 September NWE price spread against the US Gulf Coast to North Asia (via Cape of Good Hope)/Northwest Europe freight route cost.

However, traders noted that the availability of spot cargoes in July remained healthy despite the narrower East-West arbitrage amid muted demand across Asia.