JKM monthly derivative trade volumes hit year-to-date high in Oct

LNG futures traded volumes cleared on financial exchanges in October record the highest monthly volume in 2023 at 75,104 lots, surpassing the previous monthly high of 66,884 lots in May, according to exchange and broker data.

The open interest recorded in October also hit a one-year high, with a total of 87,602 lots standing across the Intercontinental Exchange and the Chicago Mercantile Exchange as of Oct. 31, with ICE reporting 87,572 lots and CME reporting 30 lots.

About 87,247 lots of open interest for JKM LNG futures were recorded and 325 lots of open interest were recorded for the JKM LNG Balmo-ND futures.

Additionally, ICE recorded a total of 8,100 lots of the first-ever trades for the JKM Exchange of Futures for Physical (EFP) derivative(opens in a new tab) on Oct. 2, making up 73.3% of the trades recorded on that day.

LNG futures traded volumes in October rose by 77.62% month on month and 26.62% year on year.

The derivative contracts traded on ICE in October totaled 75,104 lots, which is equivalent to approximately 14.4 million mt, or 228 cargoes.

The monthly contract for January saw the highest traded volumes on ICE, at 19,515 lots, making 25.98% of total trade volumes in October. The January contract also recorded the highest open interest at 12,005 lots as of Oct. 30.

Market participants attributed the rise in derivatives trades in October to optimization and trading activity by traders and portfolio players.

"There is not much demand coming from end-users as traders have already sold strips to them," a trader said.

Asia-Pacific spot LNG prices were also traded in a larger price range in October compared with previous months. Platts JKM for December, the benchmark price for LNG delivered to Northeast Asia, was in the range of $12-$19/MMBtu in October. The highest daily price was recorded on Oct. 18 at $19.055/MMBtu, while the lowest daily price was recorded two weeks earlier at $12.625/MMBtu.

The larger price range traded for Asian LNG in October was caused by various incidents that fueled supply uncertainties including the ongoing Israel-Hamas conflict and disruptions to the Balticconnector gas pipeline between Finland and Estonia.

Meanwhile, demand for spot cargoes from end-users remained muted in October as utilities across Northeast Asia reported comfortable inventories.

Some market sources also highlighted the reluctance of Asian buyers to procure cargoes due to the unaffordability of LNG. "I don't think many will come out to buy, prices are too high at the moment," a market source said.

In India, the availability of cheaper alternative energy sources, such as fuel oil, propane, and naphtha, are disincentivizing utilities from procuring LNG cargoes, according to Indian sources.

Platts assessed JKM in the mid-$16/MMBtu for most of October, compared with the high $29/MMBtu across the same period last year, showed S&P Global data.

The arbitrage window for Atlantic volumes continues to sway between selling into Europe and Asia as market participants noted that the current fundamentals do not support sending additional US volumes to Asia.

"I don't see the arbitrage open beyond the prompt and only in the very prompt could it be open at this stage," a trader said. Several other traders noted that arbitrage opportunities are also dependent on one's shipping costs.