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Mon 1 Feb 2010, 08:42 GMT

Singapore Exchange to start 380-cst contract


New fuel oil contract is due to commence trading later this month.

Singapore Exchange (SGX) said on Monday that it will start trading its new fuel oil 380-centistoke (cst) futures contract on February 22nd.

"The new contract provides our global participants an attractive price discovery and hedging product," said CEO Magnus Bocker in a statement.

The launch of the new contract follows almost a year of discussions with leading industry players. In April 2009, fuel oil trading companies Vitol, Glencore, Chemoil, Hin Leong and PetroChina, along with oil firms Shell, BP and Singapore Petroleum Co, bunker supplier Equatorial Marine and shipping firm Maersk were reported to have met with the Singapore Exchange to discuss the potential launch of a 380-centistoke (cst) fuel oil contract.

In September 2009, the Singapore Exchange then invited public comments on the proposed contract specifications of the 380-cst contract.

The new 380-cst contract will be traded in units of 100 tonnes per lot on a free-on-board (FOB) basis and is physically deliverable at Exchange-designated installations. At present, all these installations are located in Singapore.

In December 2009, SGX was said to have proposed two daily trading sessions - 9:00 am-7:00 pm and 8:00 pm-10:55 pm, with the 7:00 pm closing price as the day's settlement. The monthly settlement would be the average settlement price for the last five days of the month. The key features of the contract that relate to physical delivery are:

1. Delivery Facilitated by the Clearing House

The Clearing House will match buyers and sellers after taking into account the quantity, installations for delivery, delivery dates and methods of delivery to the extent reasonably possible. The minimum size for delivery will be 2,000 Tonnes.

2. Performance Deposit and Security

To ensure that buyers and sellers fulfil their delivery obligations, buyers and sellers will post a Performance Deposit (PD) with the Clearing House. Upon delivery by the seller, the Clearing House will require a security from the seller for application in the event of any disputes arising from the fuel oil delivered.

3. Performance Guarantee

The buyer’s and seller’s respective Clearing Members will guarantee the performance of payment and delivery obligations in accordance with the SGX Clearing Rules and Specifications.

4. Use of Letters of Credit

Letters of credit may be used for the posting of PD and payment.

Singapore is the world's leading bunker port by volume with between 2.6 and 3.2 million tonnes sold on a monthly basis. Overall fuel oil volumes transacted average around 5 million tonnes per month.

BP   Maersk   Vitol   Singapore  Singapore (SG) 
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