Prediction of Future LNG Prices from Forward Curves

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  • U.S. exports of LNG commenced with the arrival to the market of the first Sabine Pass cargoes.
  • It increased the global liquefaction capacity by 25%.
  • US LNG will rise to nearly 1/3 of all LNG supply.
  • Platts JKM™ and GCM provide market-based future LNG prices.
  • It extends over 48 forward months, provides clients with a market value.
  • It is obtained from Platts editorial market knowledge and quantitatively-derived forward curves available within DLF.
  • Forward curves for JKM reflect tenors further out than the following calendar year.
  • The Platts GCM the entire forward curve is quantitatively derived.

According to an article published in Platts, LNG is the energy market with the most dynamic fundamentals, with multiple, significant moving pieces from the rapid rise of US exports stemming from the U.S. shale revolution.

Shift in dynamics

The changing European supply and demand dynamics, the evolving nuclear situation in Japan, and the rising Chinese appetite for LNG are the major causes for the rise of LNG market.

U.S. exports of LNG commenced in February 2016 with the arrival to the market of the first Sabine Pass cargoes, which increased the global liquefaction capacity by 25%, and by some projections, US LNG will rise to nearly 1/3 of all LNG supply.

Market-based future LNG prices

In response to growing LNG trade volumes, Platts JKM™, and Platts Gulf Coast Marker (GCM) (part of the DLF Market Data Category) provide market-based future LNG prices unparalleled in global markets. DLF offers real opportunities for participation in this emerging spot and derivative market by producers, financial marketers, traders, and consumers.

Help clients manage LNG market price risk

Designed to help clients manage LNG market price risk, LNG Forward Curves provide fair market value-based forward curves for the key LNG trading hubs, Platts JKM™, and North America (FOB USGC), extending over 48 forward months, provide clients with a market value that combines Platts editorial market knowledge and quantitatively-derived forward curves available within DLF.

Platts quantitatively-derived forward curves for JKM reflect tenors further out than the following calendar year, while the prompt months, quarters, and calendar years are editorially assessed. For Platts GCM the entire forward curve is quantitatively derived.

Benefits

  • Make more informed trading and investment decisions
  • Calculate mark-to-market profit and loss
  • Calculate key risk metrics, such as value-at-risk
  • Report the fair value of financial instruments
  • Validate internally derived forward curves and ensure compliance
  • Manage counterparty credit exposure
  • Download and integrate flexible data (delivered daily) into your own system

Features

Platts JKM™ is the LNG (Liquefied Natural Gas) benchmark price for spot physical cargoes. It is referenced in spot deals, tenders, and short-, medium- and long-term contracts both in Northeast Asia and globally. The basis of Platts JKM™ is spot cargoes delivered ex-ship into Japan and South Korea, two of the world’s largest LNG importers. Deliveries to China and Taiwan are also reflected in Platts JKM.

Platts LNG GCM

Platts LNG GCM reflects bids, offers, and transactions on a FOB U.S. basis, normalized to the U.S. Gulf Coast, and expressed USD per British thermal units (MMBtu). Customers have expressed a desire to see an active derivative market based on the U.S. Gulf coast market dynamics. GCM forward curves provide a logical settlement price to ICE which will facilitate the development of such a contract.

Clients need to subscribe to the LF market data category as a pre-requisite for DLF. Customers can access the new DLF category by FTP or as part of the PGA Data add-on service.

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Source: Platts

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