LNG

Intercontinental Exchange, the leading global provider of energy trading platforms for futures and options, reported a record number of Dutch Title Transfer Facility (TFF) gas futures and options traded during May 2023 as the market tries to manage natural gas price risk exposure.

A record 5.7 million TTF futures and options were traded last month, which is the equivalent to a record 4,158 terawatt hours.

“Liquidity in ICE’s benchmark TTF market has grown strongly in 2023 with open interest up 37 percent year-over-year at 2.6 million contracts, the highest level since January 2022,” said Atlanta, Georgia-based ICE.

“In addition, ICE is seeing record market participation in its TTF futures and options markets, with hedging out to December 2031,” ICE said.

Analysts explained that the TTF global benchmark for natural gas and the futures market sends price signals which market participants rely on to manage their global natural gas price exposure as well as pricing the flow of natural gas in Europe.

Critical signals

“The success of the TTF derivatives market in sending these critical price signals has helped Europe balance supply and demand for natural gas, as well as identifying and clearing infrastructure bottlenecks that were created due to the changing flows of natural gas caused by the material reduction of gas flowing from Russia,” stated Gordon Bennett, Managing Director of Utility Markets at ICE.

According to ICE data, about 25 million TTF contracts have traded on ICE this year, up 17 percent year on year.

The firm noted that there was “particularly strong” activity in TTF Options where volume is up 179 percent and open interest has risen by up to 68 percent compared with 2022.

“Over one million TTF options were traded in the month of May, the second-highest volume month since TTF Options were launched on ICE Endex in 2013,” ICE said.

Open interest across ICE’s global natural gas portfolio is 31 million contracts on increase of 10 percent over last year.

The US firm offers a range of LNG market risk coverage including the US Henry Hub, the Platts Japan-Korea Marker LNG spot cargo price and UK National Balancing Point futures as well as the Platts West India Marker (WIM) and the Spark LNG Freight contracts.

Intercontinental Exchange, a leading global provider of markets data and trading platforms for energy derivatives, said that in a move made along with Magellan Midstream Partners and Enterprise Products Partners a “no-charge” arrangement had been set up for the US Gulf Coast crude oil market amid a surge also in US natural gas derivatives volumes.

ICE said that the delivery process between the Magellan East Houston (MEH) and the Enterprise Crude Houston (ECHO) terminals to transfer crude oil through the Midland WTI AGC futures contract has been expanded to include deliveries conducted via ICE’s Exchange for Physical (EFP) and Alternative Delivery Procedure (ADP) mechanisms.

“If customers take an HOU futures position to delivery and they are not matched by the exchange at the buyer’s preferred terminal, the barrels are transferred between the MEH and ECHO terminals at no cost,” explained a statement from ICE, Magellan and Enterprise.

Magellan and Enterprise are expanding this arrangement to now include HOU futures customers who take delivery via ICE’s EFP or ADP mechanisms at one terminal and desire to transfer the barrels to the other terminal.

Free pump-over

“Expanding the free pump-over to include EFP and ADPs provides customers added flexibility to optimize their use of capital while still realizing the savings on the transfer costs they would otherwise incur,” said Jeff Barbuto, Global Head of Oil Markets at ICE.

The waived transfer costs apply to EFP and ADP deliveries in addition to all volume that goes to delivery through the HOU futures contract and is executed in accordance with ICE’s rules, and will remain in effect through March 31, 2023.

A 10-cent per barrel charge will continue to apply for all other general transfers meeting HOU quality specifications.

“The EFP mechanism allows participants to exchange HOU futures positions for the equivalent quantity of underlying physical Midland WTI barrels in the same delivery month,” they added.

Since the contract began trading earlier in 2022, approximately 67,800 HOU futures have traded, representing 67.8 million barrels, including a record volume day on March 10 of 3,065 contracts.

Open interest is at 2,647 contracts and goes out to January 2023.

ICE additionally reported that in May 2022 total average daily volume (ADV) up rose 6 percent year-on-year and total open interest was up 5 percent.

The leader was natural gas with ADV up 25 percent and open interest up 14 percent.

For North American natural gas ADV in May rose 37 percent and open interest 23 percent, including record futures open interest of 17.1 million lots on May 25, 2022. 

Intercontinental Exchange, the leading global provider of trading platforms and clearing, has posted record activity in two key LNG trading derivatives, US Henry Hub natural gas and the Dutch Title Transfer Facility (TTF), the European benchmark.

ICE also announced record total futures open interest of more than 48.1 million contracts on August 25.

The platform’s North American natural gas futures and options, which includes the Henry Hub and US Basis Markets contracts, hit record open interest of 23 million, up 10 percent year-over-year, with open interest in Henry Hub futures and options up 28 percent year-on-year.

The natural gas futures and options reached record open interest of almost 3.3 million contracts.

The Dutch TTF is increasing in importance as energy traders and asset owners manage their global gas price risk.

The Dutch TFF, reflecting LNG cargo values in Europe, was last at $16.50 per million British thermal units and tight natural gas markets in the European Union and in the UK.

The UK National Balancing Point benchmark natural gas prices was even higher than the Dutch TTF at $16.85 per MMBtu on August 30.

“TTF holds open interest out to December 2028. In June, ICE extended the TTF curve to December 2031 following demand from commercial hedgers to further align TTF with typical lengths of medium to long term deals between LNG buyers and sellers, and to help market participants manage long term risk,” explained ICE.

“The globalization of natural gas, which is contributing to the growth of TTF, has also led to the establishment of the Asian natural gas benchmark ICE JKM LNG (Platts) where open interest is up 26 percent year-on-year,” said ICE.

The Henry Hub, Dutch TTF, JKM and NBP futures and options form part of ICE’s global natural gas complex alongside the West India Marker (WIM) LNG (Platts) and the Spark LNG Freight Futures contracts

.Open interest across ICE’s global environmental complex was also up 21 percent across futures and options, as participants use these markets to also price climate risk.

“As the market manages changes in interest rates, open interest in Interest Rate futures and options is up 26 percent year-on-year,” ICE added. 

Intercontinental Exchange, the US operator of global trading platforms and clearing houses, released its fourth-quarter and full-year 2020 trading volumes showing record usage of products like the Dutch Title Transfer facility (TTF) gas pricing for continental Europe and the Japan-Korea Marker spot LNG cargo price derivative.

Intercontinental Exchange, the leading operator of global exchanges and clearing houses and energy and natural gas pricing and derivatives, said the Dutch Title Transfer Facility, the main Continental European natural gas benchmark, and the Asian Japan-Korea Marker price for LNG had achieved new trading volume highs.