Platts clarifies normalization of gas hub day-ahead price-linked cargoes for Atlantic LNG

Platts, part of S&P Global Commodity Insights, would like to clarify the normalization of natural gas hub day-ahead index-linked bids, offers and trades of physical LNG cargoes considered in its Atlantic LNG price assessments.

Platts has observed an increase in the number of bids, offers and trades linked to day-ahead gas hub pricing for delivered-ex-ship Europe LNG cargoes.

Platts is clarifying that to normalize a gas hub day-ahead index-linked price to an outright price, it infers the daily day-ahead prices during the pricing period by drawing two linear strips, one between the month-ahead (i.e. M1) and the following month (i.e. M2) gas hub derivatives values, and the other between the M2 and the M3 gas hub derivatives values, joined at M2 gas hub derivatives value.

The monthly gas hub derivatives values mentioned above are assumed to be the derivatives values of the midpoint of the respective months.

For example, if on Jan. 15, a bid is priced against the average TTF day-ahead prices for a pricing period of Feb. 20-27, the February TTF derivatives value assessed on Jan. 15 would be assigned to Feb. 14, and similarly, the March TTF derivatives value would be assigned to March 15. The two values between the two dates would then determine a linear strip, giving a value for each day between Jan. 15 and March 15. As one of the normalization steps, the outright price of the bid would then be calculated as the average of those values over the pricing period of Feb. 20-27.

As a second example, if on April 25, an offer is priced against the average TTF day-ahead prices for a pricing period of June 14-21, the May TTF derivatives value assessed on April 25 would be assigned to May 15, the June TTF derivatives value would be assigned to June 15, and the July TTF derivatives value would be assigned to July 15. The three values on the three dates would then determine two linear strips joined on June 15, giving a value for each day between April 25 and July 15. As one of the normalization steps, the outright price of the offer would then be calculated as the average of those values over the pricing period June 14-21.

The above is also relevant for bids, offers and trades reported in the Atlantic LNG Platts Market on Close assessment process, which is used to help assess the values of Platts Northwest Europe, Mediterranean and Gulf Coast Markers.

Platts invites all questions and feedback to lngeditorialteam@spglobal.com and pricegroup@spglobal.com.

For written comments, please provide a clear indication if comments are not intended for publication by Platts for public viewing. Platts will consider all comments received and will make comments not marked as confidential available upon request.