LNG futures H1 traded volumes soar on steadier JKM, more physical trades

LNG futures traded volumes in the first half of 2024 rose year on year due to increased trading activity in the cargo market and stabilizing Asia-Pacific spot LNG prices, according to exchange data and market feedback.

The total traded volumes recorded for JKM LNG futures and JKM LNG balance-month next-day futures in January-June reached 495,581 lots, up 71.55% from 288,888 lots in the same period last year, according to Intercontinental Exchange data.

A Singapore-based LNG broker said the increase in traded volumes in the period was largely due to more stable Asian LNG prices. "As [JKM] prices stabilize, traded volumes will increase as the risk-reward ratio is reduced," the broker said.

Asia-Pacific spot LNG prices in H1 2024 traded in a narrower price range compared with H1 2023.

Platts JKM, the benchmark price for LNG delivered to Northeast Asia, moved in a rage of $8-$13/MMBtu in H1 2024, compared with $8-$23/MMBtu in H1 2023.

An increase in physical transactions will in turn increase hedging activity in the futures market, especially if most of the physical transactions are JKM-linked, the broker said.

The Japan-Korea-Taiwan-China region imported approximately 106.36 million mt of LNG cargoes in H1 2024, an increase of about 7.25 million mt year on year, according to data from S&P Global Commodity Insights.

The total traded volumes for LNG futures in H1 2024 were equivalent to 95.3 million mt of LNG cargoes.

In June, the traded volumes for JKM LNG futures and JKM LNG balance-month next-day futures reached 77,820 lots, down 5.85% month on month and up 61.78% year on year.

This is equivalent to approximately 14.965 million mt, or 236 cargoes.

The derivatives Platts Market on Close assessment process in June saw 16 entities report a total of 226 trades of 25 lots each for the JKM full-month and balance-month contracts. Open interest for the contracts stood at 110,283 lots across the ICE as of June 28, according to exchange data.

there were 108,628 lots of open interest for JKM LNG futures and 1,655 lots of open interest for the JKM LNG balance-month next-day futures.

JKM prices rise in June on bullish summer expectations

Asia-Pacific spot LNG prices trended higher in June as sentiment turned bullish on forecasts of above-average summer temperatures.

Several buy tenders were issued in June by Indian and Thai end-users affected by hotter weather that has boosted cooling demand.

Platts JKM rose in June to average $12.577/MMBtu in the month from $11.230/MMBtu in May.

Despite the potential increase in buying interest in Asia, the spot LNG market remained well-supplied, partly due to the opened arbitrage window between the US and Asia in June.

This was indicated by an increase in the number of reported offers nominating US base load ports during the physical MOC process, with 72 out of 141 offers in June compared with the 20 out of 122 offers in May.