LNG

The US Government forecasts that the average Henry Hub natural gas spot price would be low through March and LNG exports would decline in February, while record amounts of natural gas were consumed by the nation in January, driven by the gas-fired electric power sector.

June 6 (LNG) - Intercontinental Exchange, the leading global provider of energy trading platforms for futures and options, said average daily volumes (ADV) soared in May for natural gas products. Average daily volumes for the Dutch Title Transfer Facility (TTF) valuation for LNG increased by 79 percent year-on-year and Open Interest (OI) was up 34 percent compared with last year.

   Open Interest is the term used for the number of contracts that remain open each day and reflects how customers are adding to their positions for a period of time. Total natural gas ADV and OI were both up 10 percent compared with May 2022. “This included record futures OI of 19.7 million lots on May 25,” Atlanta-based ICE said. “North American natural gas OI was up 9 percent, including record futures OI of 17.7M lots on May 25,” ICE added.

High demand and cargo valuations are prevailing again in the liquefied natural gas market with more shipments pointing at North Asia at 5 percent lower prices than last week amid heavy traffic also around European regasification facilities as the high-flying European Union benchmark edged higher on the week by another 2 percent.

Global natural gas and LNG markets have been given further considerations to add to the mix of North Asian spot cargo prices and European gas values as the NYMEX Henry Hub jumped to $8.80 per million British thermal units on perceived very high future LNG demand from Germany to Guangdong.

The US government expects natural gas prices in the US and Europe to remain volatile through to 2022 with the Henry Hub averaging $5.80 per million British thermal units in the fourth quarter of 2021 as US LNG exports are set to increase through 2022 to meet soaring global demand even as they declined 4 percent last month.

The latest Henry Hub forecast is $1.80 per MMBtu higher than in the previous short-term energy outlook issued by the US Energy Information Administration.

“We estimate that US LNG exports averaged 9.3 billion cubic feet per day in September, down 4 percent from August,” said the EIA.

Despite the recent monthly decline, the agency noted that these were the most US LNG exports for September since the US began exporting cargoes from the Lower 48 states in February 2016.

“Even though September exports were a record for the month, they were limited by weather conditions, which led to the suspension of piloting services for several days at Sabine Pass, Cameron, and Corpus Christi,” noted the EIA.

“We expect that LNG exports will average 9.1 billion cubic feet per day in October and then increase in the coming months,” said the report.

The Cove Point LNG terminal in Maryland is scheduled to complete its annual maintenance by mid-October and resume exports this month.

Through this winter, the report said LNG exports would average 10.7 Bcf per day as global natural gas demand remains high.

Several new LNG export Trains, the sixth Train at Sabine Pass LNG and the first Trains at the new Venture Global LNG export facility at Calcasieu Pass LNG, then enter service in 2022.

The EIA outlook also forecast that US inventory draws from working gas storage would be slightly more than the five-year average this winter.

“We expect that factor, along with rising US natural gas exports and relatively flat production through January will keep US natural gas prices near recent levels before downward pressures emerge,” stated the report.

“Given low natural gas inventories in both US and European natural gas storage facilities and uncertainty around seasonal demand, we expect natural gas prices to remain volatile over the coming months,” added the agency.

The EIA estimates that US natural gas inventories ended September 2021 at about 3.3 trillion cubic feet, 5 percent less than the five-year (2016-2020) average for this time of year.

Injections into storage this summer have been below the previous five-year average, largely as a result of more electricity consumption in June due to hot weather, and increased exports even as domestic natural gas production has remained flat.

Prices of liquefied natural rose across the board with records set for North Asian spot cargoes as well as for the Dutch and UK benchmarks as cargoes deliveries increased but not at sufficient levels to alleviate global shortages.

Cargo liftings at global liquefaction plants stayed over the 100 level as North Asia spot prices increased along with US Gulf Coast futures, while pipeline and LNG supplies to the UK natural gas market jumped and available wind power plummeted.

More than 90 liquefied natural gas shipments were being lifted this week at global liquefaction plants as the US saw 12 cargoes departing from its facilities and the North Asia spot LNG price moved above the $6.00 mark, while European natural gas benchmarks were firm at around $5.15 per MMBtu.

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.