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JKM LNG derivatives June volume shrinks 7.7% to 142 cargoes

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JKM LNG derivatives June volume shrinks 7.7% to 142 cargoes

London — JKM LNG derivative trading volumes slowed slightly after a record May, to hit 42,763 lots, or 142 cargoes, over June, according to exchange and broker data.

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While the volumes shrank by 7.7% on the month, the total volume still places June as the second most active month of the year to date.

Trading for the last of the summer period -- which include contracts for the months of August and September -- saw the most activity, with both months making up 42.6% of the trade volumes in June. Among August contracts, some 6,907 lots, or 23 cargoes, were traded over the period.

However, trade in September contracts alone made up more than a quarter of total volume, with 11,318 lots, or 38 cargoes, traded during the month.

While the remaining prompt periods of summer saw significant activity, winter contracts also saw heavy trade down the curve.

The Q4 2019, Q1 2020, as well as the individual months for Q4 and Q1 also attracted strong trading interest. A total of 19,169 lots for the winter were traded over the month of June, or about 64 cargoes, some 34% of the monthly volume.

The most active of the winter period contracts was November, which saw 6,698 lots, or 22 cargoes, of trade over the month.

With winter drawing most of the market's attention, the far curve saw limited interest in June.

The Summer 2020, Q2 2020, Q3 2020 and the Calendar Year contracts for 2020 and 2021 saw lower activity, making up about 12.5% of total volume for the month at 5,349 lots, or 18 cargoes. This is down from the 30% share in May, which saw a bigger far curve interest.

JKM derivatives cleared on Intercontinental Exchange, or ICE, made up 99.4% of total volume to end the month at 42,523 lots over the month of June.

Trade cleared on Chicago Mercantile Exchange, or CME, reached a total of 240 lots in the same month, or 0.6% of the total volume. Trades cleared through CME were largely down the curve, representing the Q4 2019, Q1 2020 and Summer 2020 periods.

Market sources said that a significant amount of trade over June was the result of parties taking JKM positions against European gas, particularly on the prompt.

"There are more people getting involved in JKM against TTF spreads now," a broking source said. The month of June had seen the spread between JKM and the equivalent TTF contracts widen on the back of weakness in European gas, and optimization demand in Asia.

The spread reached $1.50/MMBtu at its widest point by the end of June.

--Desmond Wong, desmond.wong@spglobal.com

--Wyatt Wong, wyatt.wong@spglobal.com

--Edited by Kshitiz Goliya, kshitizgoliya@spglobal.com