LNG futures contract trading for Dubai, Kuwait, India spot cargoes starts in Singapore

Singapore Exchange has started trading the futures contract for liquefied natural gas (LNG) delivered to Dubai, Kuwait and India. 

The futures contract will be based on a twice-weekly spot LNG price assessment launched earlier in the year with the London-based interdealer broker Tullett Prebon.

The new futures contract adds to the existing contracts for spot LNG prices in Singapore and in North Asia, Cheong Jin Yu, SGX director of commodities derivatives said in an interview with Bloomberg.

SGX recorded 60 LNG futures contract trades during August and Cheong noted derivatives trading in LNG to rise together with the amount of fuel traded on the spot market.

Traditionally, dealing was done with long-term contracts, however, spot trading has picked up over the last two years with 18 percent of LNG volumes in 2016 sold on the spot market, rising from 15 percent in the previous year.

Cheong added that traders can use the derivatives to protect themselves from price fluctuations between the period the cargo sale is agreed and the time they need to buy and deliver the cargo.