ICE to Launch Two LNG Futures Contracts by Dec. 5
(Reuters) — Intercontinental Exchange Inc. said it plans to launch two LNG futures contracts for northwest and southwest Europe by Dec. 5, as talks among EU countries to cap gas prices continue.
The new contracts are designed to help market participants trade and hedge the difference in price between LNG for delivery in northwest and southwest Europe, the price of pipeline gas to Europe, and the price of LNG across the rest of the world, ICE said.
Wholesale European gas prices have soared over the past year as Russian gas supply to Europe has dwindled, which has had a knock-on effect on retail prices for industries and consumers.
After months of high gas prices, the EU is considering whether to cap gas prices, although countries are still split over the idea after weeks of talks.
Historically, Dutch gas prices have been used as a benchmark for LNG deliveries into Europe. But the major reduction of Russian gas supplies this year has made them extremely volatile, and more expensive than LNG prices in other regions.
The EU Commission has said an alternative LNG price benchmark – which market participants could use voluntarily – should be based on verifiable price assessments for LNG cargo deliveries, to ensure it reflected real-world prices for the fuel.
The Commission has already initiated work on a new benchmark with the Agency for Cooperation of Energy Regulators (ACER).
"Reflecting the energy situation which exists within Europe today, customers need a futures contract to price LNG imports into Europe and provide a means to manage the difference with the price of natural gas delivered via pipeline," said Gordon Bennett, managing director of utility markets at ICE.
"ICE is ready to assist with developing an EU futures market based on the complementary LNG benchmark to be developed by ACER," he added.
ICE said the contracts will be cash-settled based on Spark Commodities’ price assessments for LNG cargos and priced in U.S. dollars per million British thermal units in line with ICE’s existing LNG contracts.
It also plans to launch three supporting natural gas first line contracts for the French gas hub PEG, the German hub THE and Italian PSV hub. All the new contracts are due to be launched on Dec. 5, subject to regulatory approval.
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