From 2014 to 2015, U.S. natural gas trading volume increased 4 percent, according to a new report from Cornerstone Research. The report, Characteristics of U.S. Natural Gas Transactions—Insights from FERC Form 552 Submissions, finds that the trading volume measured by Form 552 submissions increased for the first time since 2011. The number of Form 552 respondents also increased, from 656 in 2014 to 680 in 2015.
Aggregate trading of natural gas contracts on the two main futures exchanges decreased for the third straight year. Intercontinental Exchange Inc. (ICE) trading decreased by 3.8 percent and CME Group Inc. (CME) trading increased by 2.4 percent as the CME gained market share.
U.S. natural gas production has been ramping up and is projected to continue increasing due to shale gas and tight oil. U.S. production is expected to outstrip U.S. consumption by 2018, and the prospects for liquefied natural gas (LNG) exports continue to drive the market.
- The trading activity reported in the Form 552 submissions totaled 123,829 tBtu transacted by 680 respondents. The number of respondents increased by 24 from the prior year.
- The volume of reported transactions indicates that, on average, a molecule of natural gas was traded through approximately 2.4 transactions from production to consumption.
- The U.S. natural gas industry remains unconcentrated, with a large number of diverse participants. The top 20 companies accounted for slightly over 43 percent of volume reported on Form 552 submissions. Of the 20 leading companies last year, 17 of them were also among the top 20 in 2014.
- In 2015, the base of transactions used to set the price indices continued to shrink relative to the transactions that relied on the indices. The volume of transactions dependent on the indices was over seven and a half times larger than the volume of transactions potentially reported to the indices.
- The volume potentially reported to price-index publishers decreased for the fourth consecutive year.
- Of the 680 Form 552 respondents in 2015, 111 (16 percent) reported transaction information to the price-index publishers for at least one affiliate. While the majority of Form 552 respondents did not report, the reporting companies tended to be larger than average.
- For the first time, companies chose not to report more than half (50.7 percent) of the reportable fixed-price volume.
- Reporting to price-index publishers was inconsistent across industry segments in 2015. Based on Cornerstone Research’s proprietary classifications of market participants, integrated-upstream firms reported index-price transactions more than any other industry segment.