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Volume for 2017 JKM swaps to-date has exceeded half of 2016

Asia and Middle East LNG Market Update

April 12, 2017 - By Desmond Wong

Swap volumes for March continued February’s growth, with transactions gaining 15.04% against February to 2,830 lots traded, up from 370 lots from the previous month.

This makes March 2017 a new all-time record month for ICE-cleared JKM swaps activity. The previous most liquid month was December 2016, at 2,710 lots cleared on ICE.

Cumulative JKM swap volumes to date

According to ICE and broker data, trade in the Q3 2017 JKM swap lead the market, with 810 lots changing hands over eight trades over the month.

Close behind was the Cal 18 swap, which saw 660 lots of trade, while the Q4 2017 was also active with 450 lots changing hands.

This eclipsed trade in prompt month contracts, with May JKM swaps ending March at 340 lots traded, while June saw 405 lots traded over the month.

Swap liquidity for March

Market participants said that the greater interest in quarters rather than seasons for the month was spurred by parties seeking more granularity in their positions.

“Summer is difficult because you have Q2, which can include maintenance periods, so people are more comfortable with going for Q3 alone,” said one market source.

Sources also added that the increased activity on the Cal 18 was driven by an expectation of fundamental changes in supply and demand next year as new projects begin producing.

“It’s the year when people expect greater convergence in prices,” said the same market source. “If you look at the Cal 18 prices, they either work out to around NBP+$0.50/MMBtu or 11.5% Brent, depending on how you view the market.”

Also in this feature:
Commentary: JKM inches higher on firmer end May demand
LNG News: Australia lifts its LNG export forecast, but questions whether it will surpass Qatar

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