The world's largest market for liquefied natural gas is Japan and because of such high demand, the country is planning to list the world's very first futures contract for the fuel inthe Tokyo Commodity Exchange.
The plan is to make the listing within two years for the supercooled fuel delivered to the country. The contract would cover cash settlement in dollars based on the index price for spot LNG cargoes delivered to the Asian country. The futures won't be delivered physically, the contract allows Exchange Futures for Physical transactions or EFPs. This enables traders to exchange their futures positions for a physical holding.
This program was confirmed by the Director for Commerce Policy Division of the Ministry of Economy, Trade and Industry Takashi Ishizaki. The LNG future would provide the consumers and producers a hedge against the risk of price swings at the same time challenging the methodology of linking fuel cost to oil prices.
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