European LNG Futures For The North And South West Of Europe

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ICE to launch European LNG futures for North-West and South-West Europe, says an LNG Industry news article.

Launch of two LNG futures contracts

Intercontinental Exchange, Inc. (ICE), a leading global provider of data, technology, and market infrastructure, has announced plans to launch two LNG futures contracts for North-West Europe and South-West Europe.

The contracts are designed to help market participants trade and hedge the differ-ence in price between LNG for delivery in North-West and South-West Europe, ver-sus natural gas provided by pipeline to Europe, as well as LNG across the rest of the world.

The contracts will be cash settled based on Spark Commodities’ price assessments for LNG cargos and priced in US$/million Btu in line with ICE’s existing LNG con-tracts. The contracts are due to launch on 5 December 2022, subject to regulatory approval.

“Reflecting the energy situation which exists within Europe today, customers need a futures contract to price LNG imports into Europe, and provide a means to manage the difference with the price of natural gas delivered via pipeline,” said Gor-don Bennett, Managing Director of Utility Markets at ICE. “The price of natural gas in Europe remains high because of an imbalance between supply and demand, caused by the significant reduction in the supply of natural gas into Europe from Russia and the downstream impact of physical capacity constraints across the Euro-pean natural gas network.

“Futures markets are providing important price signals to identify the location of these bottlenecks, allowing for capital to be allocated efficiently to address them by adding, for example, regasification capacity to import more LNG,” continued Ben-nett. “Futures markets are also a key risk transfer mechanism to reduce exposure to spot markets and thus a critical avenue for energy firms to manage their risk so they can maintain a stable source of energy to European societies. We continue to work closely with our customers, regulators and governments to find market-based solu-tions to the pressures caused by the energy crisis and ICE is ready to assist with de-veloping an EU futures market based on the complementary LNG benchmark to be developed by the EU Agency for the Cooperation of Energy Regulators (ACER).”

Launch three supporting French PEG

Additionally, ICE plans to launch three supporting French PEG, German THE and Italian PSV Natural Gas 1st Line contracts on 5 December 2022, subject to regu-latory approval. The cash settled contracts will trade and settle in US$/million Btu and provide market participants with additional flexibility to manage their LNG im-port exposure. ICE already offers physically delivered PEG, THE and PSV futures which are priced in €/MWh.

ICE is home to the natural gas benchmark TTF, a physically delivered contract which upon expiry results in natural gas being added to, or taken from, the TTF nat-ural gas hub via title transfer. TTF trades from ICE in Amsterdam, producing a daily settlement price based on transactions of customers physically buying and selling natural gas and is the world’s second most liquid natural gas contract after the US-based Henry Hub.

South-West Europe LNG futures

TTF and the new North-West Europe LNG futures are complemented by ICE’s existing German, Italian, French and Austrian natural gas futures and together with the new South-West Europe LNG futures, which add coverage of Iberia and the Mediterranean, will increase the choice of pricing and risk management tools availa-ble to market participants.

The five futures contracts will trade from ICE Futures Europe and clear at ICE Clear Europe alongside global energy benchmarks including Brent Crude, TTF natu-ral gas, European Carbon Allowances, coal and electricity, offering meaningful mar-gin offsets across energy portfolios to maximise liquidity and capital efficiency.

The new contracts will form part of ICE’s global natural gas portfolio alongside the existing TTF, NBP, Henry Hub, JKM LNG (Platts), WIM LNG (Platts) futures, and the Spark30S Atlantic and Spark25S Pacific LNG freight futures.

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Source: LNG Industry

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