ICE to offer first US Gulf Coast LNG futures contract

With the United States about to become a net exporter of natural gas for the first time in 60 years, Intercontinental Exchange Inc (ICE) said on Wednesday it will soon begin trading a first-ever US liquefied natural gas (LNG) futures contract. The new contracts will begin trading in May. The exchange is rolling them out as growing LNG exports propel the US transition from a net importer of gas to a net exporter of the fuel, which is expected to happen later this year or in 2018.
ICE said the contracts will be cash-settled against the Platts LNG Gulf Coast Marker (GCM) price assessment and use Platts-derived US GCM LNG forward curves for daily settlement purposes. The curves will have an initial tenor of 48 months. "Domestic and international market participants now have a risk management solution that lays the foundation for a more effective means of hedging their spot and forward exposure," said J.C. Kneale, vice president, North American power and natural gas markets at ICE, in a statement.
US gas producers, plagued by low domestic prices in recent years, are eager to sell into the international marketplace through LNG. The last time the country was a net exporter of gas on an annual basis was in 1957. It started exporting gas from the lower 48 states in February 2016. Five other US LNG export facilities are currently under construction and expected to enter service by 2019.
That growth will propel the United States into the third biggest exporter of LNG by the end of 2020, according to S&P Global Platts, which provides the price assessment for the ICE contract. "We believe the US Gulf Coast is poised to become a key anchor for LNG prices," said Shelley Kerr, global director of LNG and regional director of generating fuels & electric power, Europe, Middle East and Africa (EMEA) at S&P Global Platts. She said growth in Asia-based LNG swaps has already been strong, and now "counterparties are demanding that the new flexible supply from the US is underpinned by both price transparency and the means to hedge."