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US LNG exports boost interest in natgas futures

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Reuters are reporting that a surge in speculative interest in the US LNG export boom has pushed open interest in natural gas futures to an all-time high.

Open interest, which measures the number of contracts outstanding, in the Henry Hub front-month hit 386 826 on the New York Mercantile Exchange on 29 November, topping the previous high of 366 383 set in May 2016.

Futures for calendar 2018 have been trading at a premium over calendar 2019 since August 2016 due primarily to expectations of rising exports next year.

The US is expected to be a net gas exporter on an annual basis in 2017 for the first time in 60 years, due in part to sharp growth in LNG shipments abroad.

The country, which was not exporting any LNG at the start of 2016, is expected to have the world’s third-biggest export capacity of the fuel by the end of 2018, behind only current market leaders Australia and Kuwait.

That rapid growth in LNG exports was due to the ramp up of four 0.6 billion ft3 per day liquefaction trains at Cheniere Energy Inc’s Sabine Pass LNG export facility in Louisiana over the past two years. The first of those trains entered service in February 2016.

By the end of the year, another LNG export facility is expected to join Sabine Pass when Dominion Energy Inc’s 0.7 billion ft3 per day Cove Point terminal in Maryland enters service.

In 2018, three more US liquefaction trains are expected to enter service - a 0.3 billion ft3 per day unit at Kinder Morgan Inc’s Elba Island facility in Georgia, a 0.7 billion ft3 per day unit at Freeport LNG’s Freeport facility in Texas and a 0.6 billion ft3 per day unit at Cheniere’s Corpus Christi facility in Texas.

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