In the first half of 2017, there was a 31% jump in the volume of Henry Hub natural gas futures traded outside of U.S. trading hours, compared to the same period last year, the Wall Street Journal reports.
“The U.S. is going to be the price setter for majority of the freely traded market,” Peter Keavey, global head of energy at CME, told the WSJ. “You’re exporting the Henry Hub benchmark to the rest of the world.”
Analysts anticipate the U.S. will become the world’s swing supplier of LNG as construction is completed on a number of new terminals that will chill natural gas to a more easily exported liquid form. The shipments from these terminals may rise or fall on global supply and demand.
“The economics suggest that U.S. gas prices will act as a natural anchor,” Spencer Dale, chief economist at BP PLC., told the WSJ.
U.S natural gas prices have been depressed as the upstart shale oil industry has pumped out a significant amount of natural gas as a by product to crude oil, inundating the market with new supply. Consequently, U.S. light natural gas has been trading at relatively cheap level, compared to the rest of the world.
“We have seen interest around the world in accessing Henry Hub indexed natural gas because it comes from a stable source, it is affordable, and U.S. LNG has the most flexible contract terms in the market,” Jack Fusco, chief executive of Cheniere, told the WSJ. “The world is becoming more knowledgeable and comfortable with Henry Hub.”
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If the U.S. is able to tap into the global demand for natural gas, we might find further support for natural gas futures ahead, which may further bolster related ETF options like the United States Natural Gas Fund (NYSEArca: UNG), one of the most heavily traded natural gas-related ETFs.
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