2016 U.S. Natural Gas Trading Rises to Highest Level in Five Years

The amount of physical natural gas traded in the United States rose 5 percent in 2016 to the second-highest amount in nine years, according to Cornerstone Research’s latest annual report, Characteristics of U.S. Natural Gas Transactions—Insights from FERC Form 552 Submissions. The publication also looks at trading activity across exchanges and reporting to price-index publishers.

This was the second consecutive annual increase in U.S. natural gas trading. Production, however, experienced a modest decline. Volume on the two main futures exchanges also went in different directions—CME’s volume rose 17 percent, while ICE’s declined 2.2 percent. In aggregate, trading of natural gas contracts on the two exchanges still showed an increase.

Last year was notable for new destinations for U.S. natural gas exports. The first shipment of liquefied natural gas (LNG) from the lower 48 states occurred early in the year. Also in 2016, the first LNG carrier passed through the new, larger set of Panama Canal locks, which provide a more direct route from the U.S. Gulf Coast to Asia. Europe remained a source of demand for U.S. natural gas, but now faces competition from Asia.

“The EIA is forecasting that the United States will become a net exporter of natural gas by 2020, largely due to the expected expansion of the LNG market,” commented Greg Leonard, a coauthor of the report. “While LNG made up less than 10 percent of total U.S. natural gas exports last year, the expected completion of additional LNG export facilities, the opening of the new, larger Panama Canal locks, and the implementation of more flexible LNG contracting practices are fueling this projected expansion.”

“One finding that we have been seeing for the last several years is that the ratio of fixed-price natural gas volume potentially reported to…

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