This is a Free article. You will receive access to the full text.

Towards an Integrated Spot LNG Market: An Interim Assessment

Free Article

This paper examines whether, and to what extent, the spot LNG markets in different regions (East Asia, Iberia, Northwest Europe, and South America) are integrated and how market integration evolves over time. We first lay out a framework of market integration in the context of global LNG market where the main supplier (e.g. Qatar) may have market power. Estimating a time-varying coefficients model, we find that a varying degree of market integration exists between all four LNG indices particularly after the Fukushima incident in 2011. We complement the time-varying coefficient analysis with a test of price convergence among the LNG indices using the Phillips-Sul (2007) methodology. The results reveal that, there is strong evidence that the spot LNG prices are converging after the Fukushima accident and they are also converging with the price of NBP in the UK. The empirical result is consistent with the change of market power of the main supplier.

Download Executive Summary Download PDF

Energy Specializations: Natural Gas – Markets and Prices; Energy Investment and Finance – Trading Strategies and Financial Instruments; Energy Modeling – Energy Data, Modeling, and Policy Analysis

JEL Codes: D47: Market Design, Q41: Energy: Demand and Supply; Prices, Q35: Hydrocarbon Resources, Q40: Energy: General, L11: Production, Pricing, and Market Structure; Size Distribution of Firms, D40: Market Structure, Pricing, and Design: General

Keywords: LNG, Spot market, Market integration, Convergence

DOI: 10.5547/01956574.39.1.xmu

References: Reference information is available for this article. Join IAEE, log in, or purchase the article to view reference data.

Published in Volume 39, Number 1 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.


© 2023 International Association for Energy Economics | Privacy Policy | Return Policy