ICE to Launch to LNG Futures for Northwest, Southwest Europe -- Commodity Comment
October 27 2022 - 9:29AM
Dow Jones News
By Robb M. Stewart
Intercontinental Exchange Inc. plans to launch two liquid
natural gas futures contracts that will allow users to trade and
hedge the difference in price between liquefied natural gas for
delivery in northwest and southwest Europe and natural gas provided
by pipeline to Europe, as well as LNG across the rest of the
world.
On the new products:
The contracts will be cash settled based on Spark Commodities'
price assessments for LNG cargos and priced in dollars per metric
million British thermal unit, in line with ICE's existing LNG
contracts, the data and market-infrastructure company said.
The contracts are due to launch Dec. 5, 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 Gordon 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 European 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," Mr. Bennett said.
"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.
ICE said it additionally plans to launch three supporting French
PEG, German THE and Italian PSV Natural Gas 1st Line contracts on
Dec. 5. The cash settled contracts will trade and settle in dollars
per MMBTu. ICE already offers physically delivered PEG, THE and PSV
futures which are priced in euros per megawatt hour.
Write to Robb M. Stewart at robb.stewart@wsj.com
(END) Dow Jones Newswires
October 27, 2022 10:14 ET (14:14 GMT)
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