February 1, 2019 / 5:51 AM / in 5 months

CME Group reports first trade for low-sulphur marine fuel contract

SINGAPORE, Feb 1 (Reuters) - The first batch of derivative contracts for a cleaner type of marine fuel oil that complies with stricter emissions rules starting in 2020 traded on the New York Mercantile Exchange (NYMEX), the CME Group said on Friday.

A trade for 10 lots of the Singapore free-on-board (FOB) marine fuel with 0.5 percent sulphur content mini futures contract was cleared on Jan. 31, a Singapore-based spokesman for the CME Group said in an e-mail on Friday.

The trade was priced at $517 per metric tonne for delivery in December 2019, the spokesman said.

Each lot of the Mini Singapore FOB Marine Fuel Futures contract represents 100 tonnes of the fuel, according to CME data, versus 1,000 tonnes for a typical futures contract.

“The size of our standard contract is adequate for cargo traders but shipping and bunkering firms have hedging needs for smaller sizes,” said Nicolas Dupuis, senior director for energy products at CME Group.

Under International Maritime Organization (IMO) rules that come into effect from 2020, ships will have to used fuel with a sulphur content of 0.5 percent or less, compared with 3.5 percent now, forcing changes upon global shippers and also oil refiners.

With just 11 months left until the new rules take effect, the rise in trade liquidity in physical cargoes and derivatives of the new IMO-compliant fuels is a crucial step towards price discovery for the new lower-sulphur fuel grade.

“Even though the IMO rules kick-in in 2020, logistic arrangements need to be in place to handle the 0.5 percent requirement and shippers would want to secure their supply and understand the economic impact of the new specifications,” said Dupuis.

The NYMEX in December became the first exchange to list marine fuel futures contracts with 0.5 percent sulphur content for trade on the CME Globex electronic platform.

This included 11 marine fuel futures contracts with 0.5 percent sulphur content covering key pricing centres including Singapore in Asia, Rotterdam in Europe and the U.S. Gulf Coast.

The contracts are set to clear through CME ClearPort and will be settled against physical marine fuel assessments from price reporting agency S&P Global Platts.

On Jan. 31, Platts assessed physical cargoes of FOB Singapore marine fuel with a maximum 0.5 percent sulphur content for loading during the second half of February at $436.05 per tonne, a Singapore-based fuel oil trader said on Friday.

Reporting by Roslan Khasawneh; editing by Christian Schmollinger

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