LNG futures traded volumes rise in April ahead of summer season

The JKM LNG futures and JKM LNG balance-month next-day futures traded volumes cleared on the Intercontinental Exchange rose 5.65% on the month and 134.43% on the year to 87,209 lots in April, according to exchange and broker data.

The derivative contracts traded were equivalent to about 16.77 million mt, or 264 cargoes. This marked the second-highest monthly record in the year, behind February at 91,780 lots.

The open interest for the derivatives contracts reached a 26-month high at 107,972 lots standing across ICE as of April 30. This was the highest since February 2022, when it recorded 110,513 lots.

Some 106,872 lots of open interest for JKM LNG futures were registered, and 1,100 lots of open interest were recorded for the JKM LNG balance-month next-day futures.

The margin rate for the front-month June JKM contract was reported at $12,630 as of April 30, according to ICE.

An uptrend was observed in Asia-Pacific spot LNG prices in April, with traders attributing the surge to sentiment turning wary following heightened geopolitical risks. Market jitters ensued as a result of the attacks between Iran and Israel that occurred in mid-April.

Platts JKM -- the benchmark price reflecting LNG delivered to Northeast Asia -- rose on the month, with the average JKM price at $10.07/MMBtu in April compared with $9.15/MMBtu in March.

The strength in prices has dented demand for spot cargoes across Asia, with many market participants opting to sell in the bilateral market, market participants said.

The trend was also seen in the physical Platts Market on Close assessment process, with the number of offers outweighing the number of bids at 137 compared with 39 in April.

The East-West arbitrage throughout April provided traders with few opportunities to engage in interbasin trades in April, according to an analysis of market data and industry feedback.

As of May 3, the arbitrage window between the US and Asia remained shut, with the H1 July JKM-H1 June NWE spread against the USGC-to-North Asia/Northwest Europe freight rate marked at minus 27.10 cents/MMBtu, calculated based on the Cape of Good Hope route, according to S&P Global Commodity Insights data.

However, traders noted that the closed East-West arbitrage posed no challenges for the Asian market due to high cargo availability for June shipments.