Global energy and commodity price reporting agency Argus Media on Monday (22 June) published an analysis on the performance of China’s first VLSFO futures and the strategies adopted by each stakeholder in the VLSFO market from hedge funds to oil producers.
Trading in China’s first very-low-sulphur fuel oil (VLSFO) contract started today, with volumes in the most-active contract exceeding 1mn t.
The front-month January 2021 contract on the International Energy Exchange (INE) opened at 2,489 yuan/t ($352/t) and closed up by 7% at RMB2,665/t or $377/t. Trading volumes in the January contract were 1.3mn t (8.4mn bl), with open interest at about 250,000t.
Argus assessed its spot VLSFO bunker price in Zhoushan at $333.70/t today.
The Shanghai-based INE list 12 monthly contracts, starting from January next year. The list price for all 12 contracts was set at RMB2,368/t. The contract is traded in 10t lots and deliveries must have viscosity of 100-380cst, maximum density of 0.991kg/m³ and maximum 0.5% sulphur content.
The decision to set the first contract expiry at more than six months away is designed to encourage more market participants to trade the new contract. Financial market participants, such as hedge funds and futures companies that mostly cannot take delivery of the underlying product, are expected to be the most active participants as a result.
The level of interest from physical market participants, including Chinese VLSFO producers, licensed bunker suppliers, bunker trading firms and shipowners, is less clear.
One bunker supplier in the major Chinese hub of Zhoushan said it is concerned that hedging on the INE would expose it to price volatility, as financial traders may bid prices to levels at a wide spread with the physical market. The company may instead use the futures contract as a marginal source of bunker supply.
Chinese shipowners — the main consumers of bunker fuel — mostly do not trade derivatives and instead buy on a fixed-price basis. And many bunker trading firms are taking a more cautious stance after banks started to tighten their credit.
Domestic refineries have the option of using the INE to hedge their sales prices. But most are state-controlled companies that are either reluctant to participate in the derivatives market, or in some cases banned from doing so by their risk-averse parent companies.
The contract launch comes after China introduced export tax rebates on VLSFO earlier this year, prompting domestic refineries to increase production and exports of the fuel.
The INE’s parent company the Shanghai Futures Exchange has listed a 380cst high-sulphur fuel oil (HSFO) futures contract since July 2018. The contract attracted turnover of 236mn lots, or 23.6bn t, in January-May this year, but only about 300,000t was delivered.
Photo credit and source: Argus Media
Published: 23 June, 2020
Between November 2016 and October 2017, Mr Tan falsified at least 20 invoices and submitted these invoices to UOB and OCBC, according to court documents obtained by bunkering publication Manifold Times.
‘CSM Taurus arrived in Singapore during mid-September and is currently undergoing final preparations before starting commercial operations,’ General Manager of CSM tells Manifold Times.
Criminal syndicate’s tampering with MFMs on bunker tankers Southernpec 6 and Southernpec 7 conceptualised by three masterminds and carried out by cargo officers on board, according to joint statement.
Seeks information connected to SGS COQs of Gas Oil and Marine Diesel Oil cargoes loaded on board Vinalines Glory from the Vopak Banyan Terminal in Singapore between January and February 2013.
Additional topics of bunker contamination and OCM services discussed at VPS’ Fuel Management Challenges – The Year of 2021 & Beyond webinar on 23 September; Manifold Times summarises the session.
‘The JMs have failed to discharge their duties by blindly helping the Banks mount a false case against the Defendant,’ wrote defence lawyers representing former IPP Director Dr Goh Jian Hian in court statement.