The Asia Pacific Exchange (APEX) launched the APEX Argus Bunker Index Singapore LSFO 0.5%S futures contract on Friday 18 October, reports a news release on PR Newswire.
Strict sulphur regulations
This contract provides a tool for market participants to hedge price risks associated with marine fuel.
The contract complies with tighter sulphur specifications being introduced by the International Maritime Organisation in 2020.
A total of 120 lots traded on the opening day of the December, January and February contracts, with prices closing at $539.10/t, $543.50/t and $537.40/t, respectively.
APEX Argus Bunker Index
APEX Argus Bunker Index Singapore LSFO 0.5%S futures have been launched to coincide with new IMO rules taking effect in January 2020, where ships without exhaust scrubbers are required to use fuel with a sulphur content of a maximum of 0.5%, a reduction from the current 3.5%.
Marine fuels industry and shipping companies face a huge challenge in managing risk associated with the price of this new fuel.
This new contract is the first derivative worldwide to provide a delivered bunker price hedging tool for 0.5% sulphur fuel.
Opportunity for crude trading
The new contract provides market participants such as shipowners that have future requirements and suppliers holding fuel inventory with an instrument for hedging.
In addition, it may create opportunities for spread trading across crude and other refined oil product markets, as well as inter-month trading.
The contract is cash settled against the monthly average of Argus’ daily assessments of LSFO 0.5%S bunker fuel delivered between 4 and 12 days from the trade date, for volumes between 500t and 3,000t, with a viscosity of less than 380cst and less than 0.5% sulphur.
Argus removes price outliers using statistical analysis prior to calculating a volume-weighted average of the trades reported by 7pm to provide an average price traded for the fuel that day in Singapore.
Hedging instrument for market
“Argus is pleased to see a successful first day of trading on the APEX contract and we hope it will prove to be a useful hedging instrument for market participants,” Argus Media chairman and chief executive Adrian Binks said.
“Argus’ delivered bunker price assessments for Singapore have gained the confidence of the marine fuel community as reliable, independent price assessments since being launched in June 2018,” he said.
He also added, “Argus will continue to provide reliable marine fuel assessments including low and high-sulphur fuel oil and low-sulphur marine gasoil in Singapore and elsewhere, including the Zhoushan Bunker Indexes (ZBIs) launched earlier this year.“
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Source: PR Newswire
