LNG Swap

An LNG swap is a financial derivative that settles against liquefied natural gas price benchmarks rather than requiring physical delivery. These instruments allow participants to hedge or speculate on LNG price movements without handling cargoes.

LNG swaps reference indices such as JKM or regional hub prices and are increasingly important as LNG markets globalize. Oil traders often use LNG swaps to manage cross-commodity exposure, given the historical linkage between oil and gas pricing.

Swaps can be structured with fixed and floating legs, monthly averaging, or optionality tailored to specific market needs. They are typically traded OTC, introducing counterparty and credit considerations.

LNG swaps enhance price transparency and risk management in a market historically dominated by long-term contracts.