GFI to Offer LNG Financial Swap Contracts by End of Next Quarter

GFI Group Inc. (GFIG) will offer swap contracts for liquefied natural gas by the end of next quarter as it expects the market to expand in the next 12 to 14 months.

GFI will add swaps priced against the Platts Japan-Korea marker and the ICIS East Asia index, Toby Davis, an LNG broker at GFI, said by phone from London.

“There’s not a large amount of liquidity in the market; it is still in its infancy,” Davis said. “If we enter the market now, we will set ourselves up for when it grows.”

GFI joins brokers including ICAP Plc (IAP), Tullett Prebon Plc (TLPR) and Tradition Financial Services Ltd. that trade physical and financial LNG products. Demand for shorter-term cargoes soared in 2011 after Japan shut all its reactors following the meltdown at the Fukushima Dai-Ichi plant. The nation is considering restarting its 50 plants, all but two of which are still shut for safety checks.

“Dynamics will change,” Davis said. “If Japan starts turning on its nuclear plants, we continue to see more demand from South America” and increased supply from Australia that may boost volumes priced against the JKM swap, he said.

Most of the world’s LNG, gas chilled to a liquid for transport by seaborne tanker, is traded under long-term contracts. Short-term LNG deals, with a duration of less than four years, rose 50 percent last year to account for a quarter of the amount supplied on world markets, according to the International Group of Liquefied Natural Gas Importers, a Paris- based lobby group.

To contact the reporter on this story: Rachel Morison in London at rmorison@bloomberg.net

To contact the editor responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net

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