Commodity Management Blog

Innovative Ideas and Thought Leadership for Volatile Commodity Marketplace

LNG ShipA sustained boom in natural gas recovery has shifted conversations in the United States from speculation about shortages and price hikes to decisions on how much should be exported. Studies continue to locate proven reserves and natural gas companies are vying for permission to build facilities to create liquefied natural gas (LNG) and export it to non-U.S. customers. Of the 20 federal permit applications that have been submitted to the Energy Department, only two (Cheniere Energy Inc., and Freeport LNG Expansion L.P.) have received approval. However, recent actions and statements made by the Obama administration suggest that more will be approved soon.

Companies given the go ahead will need to determine if the upfront billion dollar cost and time required to build a liquefaction/export facility is worthwhile. In the last few years alone, the U.S. has seen average prices of natural gas range from as little as $2.66 to nearly $8 per MMBtu. While Asia and Europe have seen double digit pricing during that time, it is difficult to predict what will happen as markets gain access to additional supply.

Regionalized natural gas markets are already volatile. Changes in weather, unexpected problems with transport/refining equipment, and political events/policies can all drastically affect supply and demand. The vast amount of LNG set to enter foreign markets will increase uncertainty, and make it harder to navigate risk. Market participants and energy companies must be able to mitigate the risks of trading on a global scale.

Triple Point Technology’s energy trading and risk management (ETRM) software, Commodity XLTM, offers the best path to success. End users can accurately and efficiently monitor physical commodity movements and price changes, and configure a customized dashboard to display trade information and risk positions across transactions and markets. Click here to read more about Commodity XL for Gas.

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