LNG futures trading surges in April as India prepares for summer demand surge

New Delhi [India], May 7 : In the wake of rising demand and geopolitical tensions, liquefied natural gas (LNG) futures traded volumes experienced a notable surge in April, marking robust activity in anticipation of the summer season.
Amidst these dynamics, India, a significant player in the LNG market, continues to see an upward trajectory in its LNG imports, driven by various sectors including power, industry, and transportation.
According to data from March 2024, India's total LNG imports, including long-term and spot purchases, stood at 1.9 million metric tonnes (MMT), amounting to USD 1113 million. For the fiscal year 2023-24, India's cumulative LNG imports reached 23.3 MMT, valued at USD 13266 million.
Forecasts suggest a further 7-8 per cent increase in LNG imports in 2024, fuelled by burgeoning demand and ongoing infrastructure development initiatives.
India's ambitions to elevate its LNG import capacity align with its goal to raise the share of natural gas in its energy mix to 15 per cent by 2030, up from the current 7 per cent. This move aims to reduce reliance on more polluting fossil fuels such as coal and oil.
According to S&P Global Commodity Insights, the Japan Korea Marker (JKM) LNG futures and JKM LNG balance-month next-day futures traded volumes witnessed a significant uptick in April, reflecting market activity.
Data from the Intercontinental Exchange (ICE) indicated a 5.65 per cent month-on-month increase and a staggering 134.43 per cent year-on-year rise, with 87,209 lots cleared.
These derivative contracts, equivalent to approximately 16.77 million metric tonnes or 264 cargoes, indicate strong trading interest in LNG futures.
Open interest for the contracts reached a 26-month high of 107,972 lots by the end of April, showcasing robust market participation.
Analysts attribute the surge in LNG futures trading to various factors, including a surge in Asia-Pacific spot LNG prices amidst geopolitical tensions.
Market sentiment turned cautious following heightened risks, particularly the conflict between Iran and Israel in mid-April.
The Platts JKM, a key benchmark reflecting LNG delivered to Northeast Asia, witnessed an increase, with the average price rising to USD 10.07/MMBtu in April compared to USD 9.15/MMBtu in March.
This upward trend in prices influenced trading behaviour, with some market participants preferring bilateral deals over spot cargoes.
Despite the closed East-West arbitrage throughout April, which limited interbasin trades, traders noted ample availability of cargoes for June shipments, mitigating any challenges posed by the market dynamics.
While the current geopolitical landscape and market trends present uncertainties, India's continued focus on expanding its LNG infrastructure underscores its commitment to diversifying its energy sources and meeting growing demand.
As the summer season approaches, stakeholders will closely monitor LNG market dynamics for further insights into future trends and developments.