In the race to develop a world benchmark for a commodity increasing in importance globally, ICE is winning… Here is the Wall Street Journal:
“By May, global gas will have a futures contract based on liquefied exports coming out of the U.S., according to Intercontinental Exchange Inc. and S&P Global Platts. The two companies are launching the effort, an ICE traded contract, as liquefied gas supplies are soaring, raising interest from suppliers and traders eager to lock in or bet on prices.”
“LNG has long been sold mainly through yearslong contracts priced off oil, gas that is piped, and price reporting agencies’ data. But so much new supply is coming world-wide from the U.S. to Australia that it is likely more than long-term consumers can take, forcing them to resell it. Spot market activity has already surged and many traders are eager for derivatives to deal gas globally.”
And here are Tim Boersma and Tatiana Mitrova from their piece, A Changing Global Gas Order, published by Columbia/SIPA:
“What we see unfolding is what some have labeled as a reconfiguration of global LNG markets, which today constitutes about one third of global gas trade. Price mechanisms are changing, moving away from oil indexation and toward indexations based on various pricing points in the more liquid parts of the world (such as Henry Hub in the United States, NBP, or TTF in Europe). We believe it is only a matter of time before offtakers realize that spot market prices do not necessarily equate to low prices, as is sometimes erroneously assumed.”
“New contract configurations at a certain stage will also necessitate a new approach to transactions. They will likely be more frequent, less specific (more standardized), and involve more participants. This will not only encourage further hub development but also potentially lead to the “UBERization” of LNG trade with buyers dispatching LNG cargoes from a liquid global market whenever they need one. Overall, we expect the market will become much more efficient and liquid. In addition, the financial risk in these projects will increasingly shift toward the gas producer, and not, as historically has been the case, predominantly rest with the buyer.”
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