A new report assessing the market impact from expanding liquefied natural gas (LNG) trade and exports has been released by the US Commodity Futures Trading Commission (CFTC).
In 2016, the US transitioned from being a net importer to a net exporter of LNG. In aggregate, US LNG export plants in operation and under construction have a capacity of 10 Bcf/day, which is about 13 per cent of current US dry production. The report synthesises public source evaluations of the impact of LNG market changes. The report attempts to summarise key factors and how the LNG market outlook has evolved; it does not attempt to offer any views or opinions.
According to the report, global LNG trade growth is expected to continue with US LNG exports having the most rapid growth rate and a competitive price advantage. US LNG export growth, meanwhile, may put upward pressure on US natural gas prices and expose a heretofore relatively isolated North American market to global market dynamics.
In addition, burgeoning US LNG exports are affecting global LNG market dynamics, including contracting and risk management practices in CFTC regulated markets.
“Over USD30 billion in construction capital has been invested by the two firms with operational LNG plants. Further, significant investments in support of these plants have been made in new natural gas pipeline assets. The LNG firms and their customers use CFTC regulated futures and swaps to manage investment, commodity, and operational risks. It is important for the CFTC and the public to understand the changing physical market dynamics. In this regard, the CFTC must foster stable, vibrant, and liquid derivatives markets to support risk management practices,” says Amir Zaidi, Director of the CFTC’s Office of Market Oversight.
