TOKYO: The Tokyo Commodity Exchange, or TOCOM, started liquefied natural gas futures trading Monday, making yen-denominated trading available for LNG futures contracts, mostly traded in US dollars overseas.

But only one contract was traded on the day, and market sources suggested that expanding the trading is seen to be a major challenge.

The benchmark June LNG futures contract fetched the first price of 4,200 yen per million British thermal units, and closed at the same price.

LNG prices are on the rise due to increasing demand globally for use in electricity generation and city gas distribution. Prices surged recently amid concerns about supplies from Russia following its invasion of Ukraine.

LNG futures contracts, in which prices for future LNG transactions are determined in advance, have become an important means of reducing price fluctuation risk, said Takashi Ishizaki, president and CEO of TOCOM, a unit of Japan Exchange Group Inc., or JPX.

The industry ministry approved TOCOM’s LNG futures trading for a three-year trial. The exchange aims to make the LNG market permanent by expanding trading volume.

LNG futures contracts can be traded by companies including electricity and gas providers as well as individual investors.

Also on Monday, TOCOM made permanent electricity futures trading that started on a trial basis in September 2019. It expanded the scope of contracts available for trading to 24 months ahead of settlement, against 15 months previously.

JIJI Press