Singapore—JKM and TTF derivatives hit record levels in January as market participants looked to hedge their risk amid heightened volatility in natural gas and LNG markets, according to data from the Intercontinental Exchange, or ICE.
JKM LNG, the S&P Global Platts spot Asian LNG price, hit a combined futures and options open interest record of around 125,000 contracts on Jan. 14, ICE said in data published on Feb. 1.It said JKM Futures hit record monthly volume of more than 91,500 contracts in January, and average daily volume in JKM LNG futures and options increased 37% with open interest up 48% year over year.
Platts launched the Platts Editorial Window or eWindow tool for assessing the tradable value of derivatives contracts for Platts JKM on June 26, 2020. It allows users to execute trades on the ICE platform without leaving the Platts Market on Close assessment process.
JKM-linked bids, offers and trades in the spot market have grown significantly with growing activity on the forward-JKM market, that has allowed the market to gain visibility on prices in the Asian LNG market for several months and years ahead.
This has become critical for the market, especially after winter demand spikes and supply disruptions pushed Platts JKM to a record high of $32.5/MMBtu in mid-January. The JKM-TTF spread, the price difference between the Asian benchmark and Dutch gas prices, also surged to a record high of around $25/MMBtu in that period.
TTF Futures hit record open interest of around 1.9 million contracts on Jan. 27, and TTF futures and options hit record daily volume of more than 347,500 contracts on Jan. 12, ICE data showed.
TTF Futures average daily volume increased 67% year over year, with open interest up 40%, and TTF futures and options hit record monthly volume of around 4 million contracts in January, beating the previous record set in January 2020, the data showed.
The record activity across the TTF and JKM LNG derivatives was driven by participants responding to volatile market conditions amid the ongoing commoditization of LNG and utilizing the contracts to manage their risk in record quantities, ICE said.
Customers needed transparent price discovery amid the recent turbulence experienced across natural gas markets, and the contracts provided natural gas price formation, Gordon Bennett, Managing Director, Utility Markets at ICE, said in the statement.
According to ICE, an increasing share of total TTF volume now trades on exchange versus over-the-counter, growing from less than 15% in 2014 to around 45% at the end of 2020, and the trend has continued through the start of 2021.
