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ICE’s global natural gas markets attract record open interest

Published by , Editorial Assistant
World Pipelines,

As the importance of pricing global gas markets continues to grow amid the liberalisation of natural gas, Intercontinental Exchange (ICE), a leading operator of global exchanges and clearing houses and provider of data and listings services, is registering record levels of open interest across its North American, European and Asian gas benchmarks. Open interest in Total Natural Gas Futures at ICE hit a new record of more than 18.5 million contracts during 2Q20.

In ICE’s North American gas complex, dynamic US shale production has stimulated activity. With futures open interest at record levels, up 30% year-over-year, market share has increased as commercial traders return to Henry Hub-related hedging in response to increased volatility in the North American market. Open interest in ICE’s US Basis contracts, which are used to manage exposure to natural gas at different delivery points throughout North America, set a series of records during April and May, and hit a new high of more than 10.1 million contracts on 1 May 2020. ICE offers 60 different basis locations to trade, enabling customers to mitigate their risk at locations across North America.

At the same time as new highs are recorded in North America, the globalisation of natural gas is propelling the growth of the ICE TTF and JKM LNG (Platts) futures into benchmarks relied on by commercial participants around the world. As uncertainty has been rising in both supply and demand dynamics across the world, these traders are increasingly utilising the breadth and depth of liquidity in ICE’s natural gas and oil benchmarks to help manage risk and optimise their natural gas portfolios.

As a result, open interest in TTF futures and options has increased by more than 70% y/y, while JKM futures and options open interest has increased by more than 100% y/y. In May 2020, JKM hit record open interest of more than 100 000 contracts.

The momentum behind the ICE TTF contract is driven by Europe’s unique role as the global balancing market for LNG which is cementing its utility as a risk management tool for customers to hedge their natural gas price risk. This is leading TTF to become increasingly internationalised, while at the same time, the record growth in the use of JKM futures reflects its increasing prominence as Asia’s natural gas benchmark.

“We are pleased to support our customers who turn to our benchmarks to manage the volatility they are facing in natural gas markets and are grateful for the trust they put in us,” said Ben Jackson, President of Intercontinental Exchange. “We are witnessing TTF evolve into the global benchmark for natural gas, similar to the critical role Brent plays in pricing global oil markets. The momentum behind ICE’s gas benchmarks is attracting more and more participants who are using these benchmarks to manage their exposure to risk at this volatile time.”

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