Tullett Prebon, the London-headquartered interdealer broker, has announced a collaboration with Singapore Exchange (SGX) to develop a spot pricing index for the Middle East and Indian liquefied natural gas markets (LNG), aimed at enhancing price discovery and risk management in the region.
The new index will provide a transparent and trusted reference price for LNG Delivered Ex-Ship under flexible terms to key ports in Dubai, Kuwait and India (DKI) and will be published every Monday and Thursday by SGX.
The industry still lacks transparency and credible price references with market participants often relying on tenders for price discovery. Those hedging physical exposures have limited options and are using Far East LNG and/or UK oil and gas benchmarks to manage risk.
This new index will provide better price discovery and fair value to our clients.
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The new index aims to provide a credible, consistent and transparent pricing mechanism as the volume of LNG trades in the region continues to rise.
With the launch of the new index expected in the second quarter of 2017, Melissa Lindsay, Global Head of LNG at Tullett Prebon, commented: “Over recent years we have seen an increase in the volume of spot trade into the Middle East and India region and this new index will provide better price discovery and fair value to our clients. Over time there will be moments where the regional price decouples from the Far East LNG or European Gas prices, so it is important for an independent and trusted regional price.”
The DKI Index will form part of the SGX LNG Index Group or ‘Sling’ series of indexes that follow the trusted methodology of collecting an average price from participants. It will be the first of its kind to use high-level terms of physical trade approach, ensuring submission of prices are on the same assumptions.
Janice Kan, Head of Commodities at SGX, added: “The winning combination of Tullett Prebon’s extensive network and deep understanding of the LNG market, along with SGX’s transparent and trusted methodology, will help the new index to develop as a benchmark for the region. We look forward to continue building industry support to enhance price discovery in the LNG market.”