LNG futures trade volumes in Q4 hit record high, 2023 volumes up 12.5%

LNG futures trade volumes on the financial exchanges during the fourth quarter of 2023 hit a record high, while the overall volume in 2023 rose 12.47% year on year, according to data from the exchanges and brokers.

Trade volumes of the LNG futures in Q4 were at 182,971 lots, surpassing a previous high recorded in Q3 2023 at 164,748 lots.

A broker cited the market activity was driven by several supply uncertainties including the industrial action at Chevron's LNG facilities in Australia and the continuous narrowing of the spread between Asian LNG futures and Europe LNG futures, which helped increasing liquidity into the market.

The derivative contracts traded across the Intercontinental Exchange and the Chicago Mercantile Exchange in 2023 totaled 636,607 lots, which is equivalent to approximately 122.4 million mt, or 1,929 cargoes.

Separately, LNG futures trade volumes in December 2023 fell 36.62% month on month and rose 49.87% year on year.

The derivative contracts traded on ICE in December totaled 41,843 lots, which is equivalent to approximately 8.05 million mt, or 127 cargoes.

The monthly contracts for Q1 2024 saw the highest traded volumes on ICE at 16,297 lots, making up 38.95% of total trade volumes in December.

ICE also recorded a total of 82,575 lots of open interest in December as of Dec. 29.

JKM LNG futures recorded 82,350 lots of open interest in December 2023, compared with 70,524 lots in December 2022. JKM LNG Balmo-ND futures saw 225 lots of open interest.

Asia-Pacific spot LNG prices witnessed a downward trend in December amid low demand for spot LNG cargoes as utilities across the region reported comfortable inventories, according to the market participants.

While a cold snap occurred in various parts of the region, market sources said that consumption of LNG has not risen significantly in the affected areas.

"There is no buying interest from Chinese players now. I don't see a lot of consumption from the cold snap earlier," a Chinese source said.

Despite stable consumption of LNG in China, buying interest emerged in the week ended Dec. 22 as China's second-tier companies came out of the sidelines to purchase spot cargo as the Platts JKM, the benchmark price for LNG delivered to Northeast Asia, became more competitive than the domestic gas prices in China.

The Platts JKM ranged between $11-$15/MMBtu price levels in December, compared to the higher price range recorded in November at $15-$17/MMBtu.

The highest daily price was recorded on Dec. 1 at $15.785/MMBtu, while the lowest daily price was recorded on the last trading day of the month at $11.249/MMBtu.

Meanwhile, South Korea and Japan’s demand for spot LNG cargoes remained tepid in December as comfortable inventories weighed on buying interest.

Despite the spread between Asian LNG prices and the Northwest Europe LNG prices staying at a premium throughout the month, industry participants noted that persistent uncertainty at the Panama and the Suez canals coupled a with lack of demand in Asia have limited interbasin arbitrage opportunities.