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Intercontinental Exchange, Inc. (NYSE: ICE), a leading global provider of data, technology, and market infrastructure, today announced plans to launch two liquid natural gas (LNG) futures contracts for North-West Europe and South-West Europe.
The contracts are designed to help market participants trade and hedge the difference in price between LNG for delivery in North-West and South-West Europe, versus natural gas provided by pipeline to Europe, as well as LNG across the rest of the world.
The contracts will be cash settled based on Spark Commodities’ price assessments for LNG cargos and priced in USD per MMBTu in line with ICE’s existing LNG contracts. The contracts are due to launch on December 5, subject to regulatory approval.
“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. “The price of natural gas in Europe remains high because of an imbalance between supply and demand, caused by the significant reduction in the supply of natural gas into Europe from Russia and the downstream impact of physical capacity constraints across the European natural gas network.”
“Futures markets are providing important price signals to identify the location of these bottlenecks, allowing for capital to be allocated efficiently to address them by adding, for example, regasification capacity to import more LNG,” continued Gordon Bennett. “Futures markets are also a key risk transfer mechanism to reduce exposure to spot markets and thus a critical avenue for energy firms to manage their risk so they can maintain a stable source of energy to European societies. We continue to work closely with our customers, regulators and governments to find market-based solutions to the pressures caused by the energy crisis and ICE is ready to assist with developing an EU futures market based on the complementary LNG benchmark to be developed by the EU Agency for the Cooperation of Energy Regulators (ACER).”
Additionally, ICE plans to launch three supporting French PEG, German THE and Italian PSV Natural Gas 1st Line contracts on December 5, subject to regulatory approval. The cash settled contracts will trade and settle in USD per MMBTu and provide market participants with additional flexibility to manage their LNG import exposure. ICE already offers physically delivered PEG, THE and PSV futures which are priced in Euros per megawatt hour.
ICE is home to the natural gas benchmark TTF, a physically delivered contract which upon expiry results in natural gas being added to, or taken from, the TTF natural gas hub via title transfer. TTF trades from ICE in Amsterdam, producing a daily settlement price based on transactions of customers physically buying and selling natural gas and is the world’s second most liquid natural gas contract after the U.S.-based Henry Hub.
TTF and the new North-West Europe LNG futures are complemented by ICE’s existing German, Italian, French and Austrian natural gas futures and together with the new South-West Europe LNG futures, which add coverage of Iberia and the Mediterranean, will increase the choice of pricing and risk management tools available to market participants.
The five futures contracts will trade from ICE Futures Europe and clear at ICE Clear Europe alongside global energy benchmarks including Brent Crude, TTF natural gas, European Carbon Allowances, Coal and Electricity, offering meaningful margin offsets across energy portfolios to maximize liquidity and capital efficiency.
The new contracts will form part of ICE’s global natural gas portfolio alongside the existing TTF, NBP, Henry Hub, JKM LNG (Platts), WIM LNG (Platts) futures, and the Spark30S Atlantic and Spark25S Pacific LNG freight futures.
