The activity during Platts Market on Close physical assessment process in 2023 rose to its highest level in three years amid increased spot trading and hedging, market sources said.
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Register NowPhysical bids, offers, and trades reported during the MOC process in 2023 jumped nearly three-timeson the year to 900, according to data from S&P Global Commodity Insights. This was the highest level since 2020, when the total activity was reported at 1,144.
A total of 22 entities reported 225 bids, 608 offers, and 67 trades in 2023. This compares with the 236 bids, 55 offers, and 26 trades reported by 18 entities in 2022.
The data does not include withdrawn bids and offers due to a linked trade, or voluntarily withdrawn bids and offers before the close.
The surge in MOC activity reflected booming spot liquidity towards the end of 2023, as Platts JKM prices largely stabilized in 2023, averaging at $13.775/MMBtu. This compares with the higher spot prices in 2022 averaging at $33.978/MMBtu.
Divergent views emerged around winter demand in 2023 amid plentiful supply across Asia contrasting with the situation a year ago. High JKM prices in the previous year were primarily attributed to the market's fear of supply shortages following the outbreak of the Russian-Ukraine war in February 2022, dampening the trading activity.
The fourth quarter reported the highest number of bids, offers, and trades in the physical MOC assessment process at 635.
The fourth quarter also saw a 654.55% increase in the number of reported offers compared to the previous quarter.
Consumption of LNG typically increases during this period as the market enters the peak heating demand season. However, market participants cited high LNG stocks in key consuming countries as the key reason for the increased selling activity observed in the physical MOC assessment process.
Meanwhile, a larger proportion of index-linked bids, offers, and trades was reported in 2022 at 92.74% (294 out of 317).
Given the stable JKM prices in 2023 relative to 2022, the proportion of flat prices used as the pricing basis for physical bids, offers, and trades on the physical MOC increased as daily price changes were less pronounced.
Derivatives MOC saw significant activity
The Platts Market on Close derivatives assessment process also saw significant activity in 2023, with the total number of bids, offers and trades reported increasing by over four-fold on the year to 7,469.
A total of 3,106 bids, 3,256 offers, and 1,107 trades were reported by 18 entities in 2023. This compares with the 850 bids, 746 offers, and 164 trades reported by 12 entities in 2022.
Shell reported the highest number of derivatives trades in 2023 at 325, followed by PetroChina and Trafigura at 155 and 151 respectively.
Increased JKM Balance Month-Next Day data reported in physical and derivatives MOC
Notably, the usage of the JKM Balance Month-Next Day hiked in the second half of 2023 with 214 out of 751 bids, offers, and trades reported using the balance-month contract as the pricing basis. In contrast, only 5 out of 149 bids, offers, and trades were linked to the balance-month contract in the first half of the year.
This trend came at a time when the market faced several supply uncertainties, including the industrial action at Chevron's Gorgon and Wheatstone facilities in late 2023 and geopolitical risk driven by the Israel-Hamas conflict that began in October, lending support to the JKM prices.
Several industry participants attributed the increased trading activity of the balance-month contract to its more precise representation of forward market fundamentals than the full-month average contract, as the current delivery month is being priced day by day.
The derivatives MOC in 2023 saw an even more pronounced year-on-year increase in bids, offers and trades for the JKM Balance Month-Next Day derivatives contract.
A total of 600 bids, 599 offers, and 489 trades were reported for the JKM Balance Month-Next Day derivatives contract across the year. This compares with the 3 bids and 3 trades reported in 2022.