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FIS executes first futures trade on IMO 2020 marine fuel contract

03 Feb 2019

Freight and commodity derivatives company Freight Investor Services (FIS) has executed the first trade on the new Singapore FOB Marine Fuel 0.5% (Platts) futures contract specs, it says.

The FIS bunker desk brokered the deal on a spread basis for December 2019 Singapore 0.5% Fuel Oil versus December 2019 Singapore 380 spread at $200.

The futures trade is the first to be made on the Platts 0.5% spot Singapore index that began publication in January 2019. Physical trading remains limited but the index is reporting a $30 premium to High Sulphur Fuel with the spread to Rotterdam higher at around $40.

Chris Hudson of the FIS Bunker desk says the rationale for making a futures trade now is to provide a degree of price certainly for the buyer ahead of the expected increase in low sulphur premiums. It will also provide cover for an owner with a scrubber-equipped vessel who requires a lower price for high sulphur product.

“With the uncertainty surrounding the cost of the switch to 0.5% sulphur fuel from January 1, 2020, as well as the need for owners with scrubbers fitted vessels to benefit from a wide hi/lo price differential, we are glad to give more clarity to the markets. Since this trade was concluded, we have seen more liquidity enter the market and the price spreads are expected to be volatile for some time yet.”

Quotes for the 0.5% fuel oil futures market are available on request, as no full forward curve is currently being published. Platts will provide settlement and margin data on the contract from February 2019 and as liquidity builds, FIS will provide a regular forward curve.

Published: 4 February, 2019

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