EU Natural Gas Futures Extend to More Than a Decade as Climate Crisis Needs Long-Term Thinking

June 16, 2021 — The Dutch natural gas futures curve will be extended on June 21 to December 2031, matching LNG deals and as the climate transition gathers pace, according to ICE Futures Europe.

Factories and power stations are seeking longer-dated markets as they seek to cut the risks of the climate transition. Natural gas generation often fills supply gaps when renewable energy supply is lower because the wind isn’t blowing or the sun isn’t shining. Many countries and companies have emission-reduction targets through 2030.

Presidents Biden of the U.S. and Putin of Russia are meeting today to discuss a wide range of issues. The two countries are major global gas suppliers.

  • The TTF Gas Futures curve currently goes out to May 2029, and ICE has open interest out to December 2028 currently, the exchange group said by email.
  • Following demand from customers to extend the TTF curve further out, the exchange is extending the curve of the TTF Gas Futures contract up to and including December 2031, it said.
  • In addition to TTF monthly futures contracts, it will also make additional quarterly, seasonal, calendar contracts and time spreads available up to December 2031.
  • The length of the curve is important, particularly for commercial hedgers who use TTF futures to manage their risk. The extension of the futures curve aligns the TTF gas futures contract close to the typical lengths of medium-to-long term deals between LNG buyers and sellers. This in turn allows market participants to manage lon- term risk related to these deals through the futures market.
  • TTF futures hit record open interest of 1.96 million contracts on June 10, up 20% year over year.
  • Open interest in JKM futures in Asia and options, which work closely with TTF to offer the market the means to hedge global gas price risk, is at 111,800, up 9% y/y.
  • “Natural gas has become a global market and the record levels of open interest and strong trading activity in TTF reflect how it is at the forefront of global natural gas price formation. The requests from customers to increase the forward curve for TTF futures to 2031 has been driven by their need to be able to hedge global gas price risk and further optimize their LNG portfolios,” said Gordon Bennett, Managing Director, Utility Markets at ICE.

See link for Biden-Putin talks: https://www.theguardian.com/world/gallery/2021/jun/16/putin-and-biden-meet-for-talks-in-switzerland-in-pictures

Generic markets Photo by Lorenzo on Pexels.com

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