CME launches global LNG swaps contracts

Fri Apr 13, 2012 8:35pm GMT

* Four swap contracts being offered globally

* Sign of growing spot LNG market

NEW YORK, April 13 (Reuters) - CME Group will launch the world's first swap contracts for liquefied natural gas (LNG) on Monday as spot trade in the fuel grows, it said in a note this week.

Previously traded under long-term contracts by a few major gas producers and their customers, the LNG market has transformed in recent years as banks and trading houses carve their own niche in the burgeoning market.

Demand for the fuel, which is shipped in specially designed tankers, is on the rise, particularly in Asia, as the fast-growing economies of India and China look for imports to make up for domestic supply shortfalls.

Short term activity has grown significantly and trades have become more complex in recent years. It is not uncommon for traders to divert tankers mid-route, seeking higher-paying opportunities as they arise.

The four new swap contracts will be referenced against price indicator ICIS Heren's indexes in East Asia, Iberia, the Mediterranean and Northwest Europe and will allow parties to hedge their exposure to volatile LNG prices.

Prices rocketed this year after Japan, the world's largest LNG importer, shut nearly all its nuclear reactors after the March 2011 earthquake and tsunami, increasing its demand for LNG in power generation.

Market Update

  • Africa
  • US
  • Europe
  • Asia
UK £ USD =1.5589
Euro USD =1.2345
Rand USD =0.0860