Singapore fuel oil contract in the pipeline -sources

Industry sources claim the Singapore Exchange is planning to launch a new 380-cst futures contract in '09.

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Updated on 28 Apr 2009 09:43 GMT

The Singapore Exchange (SGX) is in the process of developing a futures contract for bunker fuel, which could be launched within the next few months, Reuters reports.

According to market sources, a contract for 380-centistoke (cst) fuel oil in the port of Singapore would be launched first with the possibility of SGX also developing a 180-cst contract depending on how the market responds.

SGX is said to be in the process of meeting with industry participants to determine the specifications of the fuel oil futures contract, including physical delivery mechanisms, payment modes, delivery default procedures and arbitration measures.

Singapore is the world's leading bunker port by volume with between 2.6 and 3.1 million tonnes sold on a monthly basis. Overall fuel oil volumes transacted average around 5 million tonnes per month.

If launched, the SGX 380-cst contract would follow a number of similar fuel oil futures contracts developed previously.

The New York Mercantile Exchange (NYMEX) currently operates a Singapore 380-cst contract sold in 100 metric tonne lots and a Singapore Fuel Oil 180 cst Average Price Option contract.

The International Maritime Exchange (IMAREX), an Oslo-based exchange for trading of maritime-related derivative contracts, offers Singapore 380-cst FOB and Singapore 180-cst FOB contracts in lots of 1,000 metric tonnes per month, 3,000 tonnes per quarter and 12,000 tonnes per year.

IMAREX also provides three other bunker-related contracts: Fuel Oil 3.5% FOB Barges Rotterdam, Fuel Oil 1% FOB Cargoes NWE and Fuel Oil US Gulf Coast No.6 3.0% Sulphur FOB.

In October 2006, another exchange, the Dubai Gold and Commodities Exchange (DGCX), launched its own Fujairah fuel oil futures contract for high sulphur 380-cst fuel oil (4.5% sulphur) in 100-tonne lots.

Meanwhile, the Shanghai Futures Exchange (SHFE) operates a 180-cst fuel oil contract for lots of 10 metric tonnes. According to data from its website, SHFE sees average trading volumes of around 10-15 million lots per month.