Argus to launch Singapore bunker fuel derivative contract on CME

SINGAPORE, Aug 23 (Reuters) - Oil price reporting agency Argus is launching a Chicago Mercantile Exchange (CME) listed Singapore marine fuels future contract on Monday, catering primarily to suppliers and end-users of the fuel.

“This new futures contract, will make Singapore even more relevant as a financial trading and physical marine fuels hub, enabling both fuel suppliers and ship owners to hedge their risks effectively,” Alan Bannister, Asia head of business development at Argus, said on Friday.

The CME-listed contract will be the world’s first listed delivered bunker fuel derivatives contract, the company said in a statement.

The contract is 100 tonnes in size and is for 380-cst centistoke high-sulphur fuel oil (HSFO) and will settle on the monthly average of Argus high-sulphur fuel oil (HSFO) 3.5% delivered bunker assessments.

The bunker assessment are calculated on a volume-weighted average that represents the average price paid by ship-owner’s for that fuel in the spot market on a given day.

“Bunker premiums in Singapore have become increasingly volatile and are expected to remain so because of the IMO 2020 implementation of a global cap on sulphur in marine fuels,” the company said.

“This new derivative product can help manage the risk of disconnection between cargo and delivered bunker markets,” it added.

The global shipping and refining industries are bracing for new International Maritime Organization (IMO) rules that from 2020 will limit the sulphur content of fuels burned in ships to 0.5%, from 3.5% currently.

The new rules will force shippers to switch to cleaner but more expensive fuels like low-sulphur fuel oil (LSFO) or marine gasoil (MGO). Ships with expensive equipment that clean sulphur, known as scrubbers, will be allowed to continue burning HSFO.

Argus in the future also plans to introduce CME-listed LSFO and MGO marine fuels future contracts once physical trade liquidity in the fuels ramps up as a result of the global sulphur cap, Bannister said. (Reporting by Roslan Khasawneh; Editing by Rashmi Aich)