Platts, ICE agree to launch LNG electronic platform
S&P Global Platts and Intercontinental Exchange have agreed to extend their technology partnership to bring the Platts Editorial Window (eWindow) to LNG markets, the companies said in a statement Thursday.
The decision comes at a crucial time for LNG, when significant additions of flexible supply and demand are challenging traditional business models, boosting physical and financial liquidity, and highlighting the need for greater trading efficiency and transparency.
The online data-entry platform is expected to be launched “in the coming months” and will support several of Platts LNG price assessments, including Platts JKM, the benchmark price for LNG delivered into Northeast Asia, a Platts spokesman said.
The eWindow has already been widely adopted to support Platts Markets On Close (MOC) assessment process for key oil benchmarks, enabling market participants to communicate bids, offers and transactions to Platts editors and the marketplace simultaneously.
“The launch of eWindow is an important milestone in the ongoing maturity and evolution of LNG markets, moving it to the next level in terms of standardization and transparency,” said Vice Chairman of the Intercontinental Exchange Chuck Vice. “eWindow for LNG will support the physical spot market and the quality of the price discovery process,” he added.
President of S&P Global Platts Martin Fraenkel said: “In the decade since we launched Platts JKM, our focus has been to help bring increased transparency to the pricing of LNG and feedback from market participants is that now is the right time to offer the LNG trading community the benefits of the eWindow communication tool.”
Platts has used its structured MOC process to assess Platts JKM since June 2018. More than 1,000 bids, offers and trades have been submitted since.
ROOM FOR EXPANSION
The platform will support Platts’ LNG price assessments in the Asia-Pacific, including Platts JKM and DES West India, and could be an option for other regions.
Market participants have started submitting firm, named bids and offers for delivery into Middle East and European terminals as well as loadings from the US Gulf Coast, the Platts spokesman said.
“Platts is tracking the levels of transparent activity to gauge market appetite for the deployment of electronic communication tools outside Asia,” he added.
Platts’ LNG price assessments comprise DES JKM, DES West India, DES Middle East Marker (MEM), DES Southwest Europe Marker (SWE), DES Northwest Europe Marker (NWE) and FOB Gulf Coast Marker (GCM).
The decision to launch an LNG eWindow comes at a time when the physical spot market is growing increasingly liquid, diverse, transparent and central to the commoditization of LNG.
Prompt trade volumes have increased significantly in recent years, with physical transactions executed within a 90-day window accounting for roughly 25% of global LNG supply, according to the Paris-based International Group of LNG Importers (GIIGNL), up from 17% in 2016.
This increase in physical spot LNG has been accompanied by exponential growth in JKM derivatives, which is allowing market participants to hedge risk and manage price exposure.
The ICE JKM LNG, a cash-settled futures contract based on Platts JKM, hit a record 44,394 lots for futures and options combined in June and reached a new open interest record of 52,080 lots at the end of June. A total of 212,695 lots exchanged hands in January-June 2019 – the equivalent of 107 LNG cargoes – up from 166,465 lots in the full year 2018.
“ICE JKM LNG (Platts) futures and options contracts continue to break new trading records as one of the fastest growing natural gas benchmarks and the most liquid Asian natural gas benchmark,” the joint statement said.
ICE plans to launch Gulf Coast LNG (Platts) Futures on July 29, subject to regulatory approval. The contract will connect US Gulf LNG pricing to demand in Europe and Asia to allow customers to trade spreads and provide a proxy for LNG cargoes leaving the Gulf Coast.