Oil and natural gas futures and options hit record with Asia adding deep 24-hour liquidity

Wednesday, 11 March 2020
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CME Group, the world's leading derivatives market, reported an all-time daily volume record for oil and natural gas futures and options after markets plunged under the weight of the economic effects of the coronavirus and an oil price war, with trading levels in energy futures high in Asia after the US close.

CME said the record of 6.8 million contracts was set on March 9 and surpassed the previous record of 6.2M recorded on September 16, 2019 after the attacks from Yemen on Saudi oil installations.

The futures and options surge came the day after North Sea Brent crude dropped by its biggest margin in 30 years in such a short time span from almost $50 per barrel to $33.56 as Organization of Petroleum Exporting Countries (OPEC) and Russia failed to agree production cuts.

However, oil and gas and stock markets staged solid rebounds on March 10 and March 11 after the previous day’s tumble on signs of co-ordinated action by the world’s biggest economies to counter the economic impacts of the coronavirus epidemic.

The biggest CME traded volumes on March 9 were in Crude Oil futures, Henry Hub Natural Gas futures, New York Harbor Ultra Low Sulfur Diesel (ULSD), RBOB Gasoline Futures and Brent Last Day Financial Futures.

Eighth on the CME traded list was the Natural Gas European Option.

The CME’s LNG futures are all relatively new and did not make the list as they were only launched within the past six months.

The CME, which is the former Chicago Mercantile Exchange, introduced its LNG freight futures on December 23, 2019.

The trading and settlement platform had previously launched a futures contract in October 2019 for LNG linked to physically delivered volumes from Cheniere’s Sabine Pass plant.

CME noted that its West Texas Intermediate Light Sweet Crude Oil futures and options also reached a record 4.8M contracts on March 9, surpassing the previous record of 4.3M contracts traded on September 16, 2019.

“Amid global economic uncertainty, market participants around the world continue to turn to CME Group's energy futures and options for managing their risk,” said Peter Keavey, CME Group Global Head of Energy.

“In particular, our benchmark energy products have experienced high volumes outside of US market hours, demonstrating deep liquidity and flexibility around the clock,” added Keavey.

LNG prices under long-term supply contracts are expected to be lower during the next earnings reporting season by the oil and gas majors as Asian natural gas utilities benefit from lower prices.

In US natural gas, the New York Mercantile Exchange front-month future rose again to $1.93 per million British thermal units and the Henry Hub day-ahead price was higher at $1.85 per MMBtu.

The Platts Japan-Korea Marker price for Asian spot LNG was last at $3.115 per MMBtu for April cargoes.

The main European LNG price indicators rose by around 15 US cents per MMBtu.

The UK National Balancing Point price that guides LNG prices for the Atlantic Basin was last at $3.00 per MMBtu, up from $2.85 per MMBtu and the main natural gas price on Continental Europe, the Dutch Title Transfer Facility (TTF), was also at $3.00 per MMBtu.

The US Gulf Coast LNG prices from the Intercontinental Exchange, dropped during the past week become of the market glut.

The front-month April 2020 price rallied to $2.401 per MMBtu from $2.390 per MMBtu.

The May LNG future was at $2.451 per MMBtu, up from a previous $2.449 per MMBtu.

The US GC LNG future traded on ICE is a settled derivatives contract available through to April 2022 and based on the average free-on-board (FOB) Gulf Coast LNG price. 

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