As IMO2020 nears, price volatilities in the fuel oil market have become more pronounced, and in particular, prices for low Sulphur fuel oil have been fluctuating significantly. In order to provide market participants a relevant tool to hedge against these price volatilities, Asia Pacific Exchange (APEX) has launched the Low Sulphur Fuel Oil Futures Contract (LFO Contract) at 9pm on 21st Nov 2019. The LFO Contract is the first deliverable product worldwide to facilitate hedging and FOB physical delivery of low Sulphur fuel oil. The first contract month is the Jan-20 contract, and a total of 12 consecutive monthly contracts were listed.

When IMO2020 take effect in January 2020, ships that fail to install scrubbers are required to use low Sulphur bunker fuel containing not more than 0.5% Sulphur. Given the uncertainties surrounding the demand and supply of the fuel, price volatilities for low Sulphur fuel oil is expected to increase further. The LFO Contract will provide market participants an instrument to manage such price risk. In addition, traders may use the contract for spread trading against crude oil and other refined oil markets.

In terms of delivery, participants may choose from an array of delivery methods. The fuel may be FOB delivered in to a vessel or barge, or received by inter-tank transfer into a nominated tank. These deliveries shall take place at specified warehouses located in Singapore, Malaysia and Indonesia along the Straits of Malacca and Straits of Singapore. For a fuel to be eligible to be delivered, it needs to be sourced from suppliers approved by APEX. These suppliers are approved based on various criteria, including the demonstration of a positive track record of supplying compliant fuel. In order to affirm its quality, any fuel to be delivered has to be inspected by a surveyor before loading.

Besides the LFO Contract, APEX have listed a physically deliverable High Sulphur Fuel Oil Futures (FO Contract) on 11th Apr 2019. So far, the daily average trading volume for the FO Contract is around 20,000 lots (200,000 MT), and its daily average open interest is around 3,600 lots (36,000MT). In addition, following a collaboration with Argus Media, APEX have also launched the cash-settled ABI Singapore Low Sulphur Fuel Oil Futures (LFA Contract) on 18th Oct 2019. The LFA Contract will settle against a ‘delivered to ship’ low Sulphur fuel oil price index assessed by Argus.

As IMO2020 nears, price volatilities in the fuel oil market have become more pronounced, and in particular, prices for low Sulphur fuel oil have been fluctuating significantly. In order to provide market participants a relevant tool to hedge against these price volatilities, Asia Pacific Exchange (APEX) has launched the Low Sulphur Fuel Oil Futures Contract (LFO Contract) at 9pm on 21st Nov 2019. The LFO Contract is the first deliverable product worldwide to facilitate hedging and FOB physical delivery of low Sulphur fuel oil. The first contract month is the Jan-20 contract, and a total of 12 consecutive monthly contracts were listed.

When IMO2020 take effect in January 2020, ships that fail to install scrubbers are required to use low Sulphur bunker fuel containing not more than 0.5% Sulphur. Given the uncertainties surrounding the demand and supply of the fuel, price volatilities for low Sulphur fuel oil is expected to increase further. The LFO Contract will provide market participants an instrument to manage such price risk. In addition, traders may use the contract for spread trading against crude oil and other refined oil markets.

In terms of delivery, participants may choose from an array of delivery methods. The fuel may be FOB delivered in to a vessel or barge, or received by inter-tank transfer into a nominated tank. These deliveries shall take place at specified warehouses located in Singapore, Malaysia and Indonesia along the Straits of Malacca and Straits of Singapore. For a fuel to be eligible to be delivered, it needs to be sourced from suppliers approved by APEX. These suppliers are approved based on various criteria, including the demonstration of a positive track record of supplying compliant fuel. In order to affirm its quality, any fuel to be delivered has to be inspected by a surveyor before loading.

Besides the LFO Contract, APEX have listed a physically deliverable High Sulphur Fuel Oil Futures (FO Contract) on 11th Apr 2019. So far, the daily average trading volume for the FO Contract is around 20,000 lots (200,000 MT), and its daily average open interest is around 3,600 lots (36,000MT). In addition, following a collaboration with Argus Media, APEX have also launched the cash-settled ABI Singapore Low Sulphur Fuel Oil Futures (LFA Contract) on 18th Oct 2019. The LFA Contract will settle against a ‘delivered to ship’ low Sulphur fuel oil price index assessed by Argus.