Liquefied natural gas is starting to be a truly global market

The world’s biggest independent commodity traders have carved out reputations and built their billion-dollar balance sheets on a willingness to take calculated risks in oil and metals markets that more staid and established rivals shunned. Now trading houses, including Trafigura, Vitol, Glencore and Gunvor, are focusing on a new arena they see as rich with potential profit: liquefied natural gas, a once-sleepy corner of the energy industry that is rapidly transforming into the next major commodity for swashbuckling trading houses. For decades this super-cooled fuel market was dominated by state-owned producers, international energy companies such as Royal Dutch Shell and BP and rigid long-term contracts that restricted freewheeling trading activity. However, growing LNG supply from the US and Australia is starting to make the market truly global, handing more power to buyers of the fuel and creating the opportunity for independent trading firms to provide short-term deals… The four commodities houses traded about 27 million tonnes in 2017, representing 10 per cent of the market and a jump of two-thirds from 2016… The changing nature of the market and growing presence of the traders has forced companies such as Shell and BP, that have traditionally provided importers — typically a utility company selling gas and electricity — with fixed volumes under multi-decade contracts, to become more flexible.
Emiko Terazono and Anjli Raval