APEX enters agreement to use Argus’ prices in proposed LSFO futures contract
Singapore-based derivatives exchange Asia Pacific Exchange (APEX) on Monday (9 September) entered into a licensing agreement with commodity price reporting and news agency Argus Media to use its Argus Bunker Index (ABI) Singapore LSFO 0.5%S as the settlement price for a proposed new derivatives contract.
The contract can be used by oil traders, bunker fuel suppliers and shipowners to manage their price risks related to the new low-sulphur fuel oil (LSFO) required to comply with the 0.5% sulphur cap being introduced by the International Maritime Organisation in January 2020 (IMO 2020).
“The Argus Bunker Index for Singapore LSFO, which APEX intends to use to financially settle their new futures contract, is perfectly suited to the needs of the marine industry because it represents the most active and liquid part of market” Pierre Lever, Asia CEO at Argus, told Manifold Times.
“When ship owners use this index in physical supply contracts or for derivative hedging they can have confidence that the Index will accurately track the price ship owners are paying for bunker fuel in the spot market.”
ABI Singapore assessments were launched in June last year and are calculated using a volume-weighted average of fixed price delivered-to-ship bunker transactions between suppliers and shipowners reported to Argus by 7pm each day.
More than 40 companies have voluntarily contributed their trade data over the previous year and typically more than 20 deals are submitted each day.
The LSFO 0.5%S index represents the price of bunker fuel delivered within 4-12 days from the trade date, for volumes between 500t and 3,000t, with viscosity of less than 380cst and sulphur below 0.5%.
“Argus compiles the Index by collecting multiple fixed-price spot bunker transactions” said Alan Bannister, Head of Business Development for Argus in Asia.
“This means we’re able to handle the fact that the new LSFO 0.5%S fuels won’t be identical and may not be compatible. The fuels will have to compete with each other on price, so the Argus Bunker Index (ABI) Singapore LSFO 0.5%S will be a fair representation of what ship owners are paying for their IMO compliant Fuel Oil.”
The launch date and specifications for the APEX contract will be announced in due course, subject to the completion of the necessary regulatory processes. ABI Singapore assessments are available and published in the Argus Marine Fuels and the Argus Asia-Pacific Products reports.
“APEX is looking forward to partnering with Argus,” said APEX chief executive Eugene Zhu.
“Since the launch of the High Sulphur Fuel Oil Futures Contract on 11 April 2019, the average daily trading volume and open interest have been increasing steadily.
“With the upcoming IMO 2020 regulations, the energy and shipping industries are expected to face greater challenges. To better fulfil market demands, APEX is working with Argus in our development of a Low Sulphur Fuel Oil Futures Contract, which will provide a new tool for market participants in order to hedge and manage their risks.”
Related: Argus officially launches 380 cSt, MGO, LSMGO bunker price assessment
Related: Argus records first Singapore LSFO deal ahead of IMO 2020
Related: Asia Pacific Exchange officially launches 380 cSt fuel oil futures contract
Related: APEX Fuel Oil Futures Contract executes first ‘Exchange of Futures for Physicals’ op
Photo credit: Manifold Times
Published: 10 September, 2019
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