Liquefied natural gas (LNG) buyers beginning in October will be able to purchase physical volumes of the super-chilled fuel through CME Group’s new LNG futures contract, the company said Wednesday.
The U.S. LNG Export futures contract is to be available for trading on Oct. 14, pending regulatory review. Participants would take delivery at Cheniere Energy Inc.’s Sabine Pass LNG facility in Louisiana, while Freeport’s LNG terminal on the upper Texas coast and others are to be included in future delivery months.
“This contract is structured to align with the complex logistics of the LNG markets, including a unique monthly physical settlement on the U.S. Gulf Coast,” said CME’ Peter Keavey, global head of energy. “At a time when the United States is poised to become a significant source of freely traded LNG cargoes, we believe CME Group's LNG and Henry Hub Natural Gas futures will help the industry to more effectively and efficiently manage price risk around the world.”
Sabine Pass became the first source of large-scale U.S. LNG, exporting its first cargo in 2016. Since then, the facility has expanded to include five production units, with a sixth under construction. Cheniere also owns the Corpus Christi LNG terminal in South Texas, where the second production unit achieved substantial completion last week.
"This futures contract will allow for enhanced short-term price discovery and risk management for the U.S. Gulf Coast market,” said Cheniere’s Anatol Feygin, chief commercial officer. “These are important commercial evolutions for our customers and for the broader global natural gas market.”
Japanese conglomerate Jera Global Markets Pte. Ltd., which has a 20-year agreement in place to purchase volumes from a proposed fourth train at Freeport, cited the need for diverse risk management tools to bring more transparency to the marketplace.
"We expect CME Group’s U.S. LNG Export futures contract will have a positive impact on the procurement and price discovery of LNG in Asia, as well as in the U.S.,” Jera CEO Kazunori Kasai said.
The futures contract would be available for trading on CME Globex and cleared through CME ClearPort. It is to be listed on the New York Mercantile Exchange.
The United States is expected to surpass Australia and Qatar as the world's largest exporter of LNG by 2024, according to the International Energy Agency (IEA). Global natural gas demand is coming off a record year after growing 4.6% in 2018, the fastest annual pace of growth since 2010, the IEA said in its Gas 2019 report.