The market of bunker futures contracts

As discussed in detail in Chapter 5 for freight futures contracts, bunker freight futures are also issued by several organised exchanges, such as the EEX, CME Group (NYMEX), ICE and SGX. Such a variety of available futures contracts on bunker fuel oil provide to the shipping market participants the opportunity to avoid cross-hedging and minimise their hedging error. This is achieved by trading a derivative contract written upon a benchmark bunker fuel oil price, which is an underlying asset closer to the position in the physical market of a shipping operator. EEX offers freight futures contracts only on the 180 and 380cst FOB Singapore price of bunker fuel oil. Table

9.5 presents the full contract specifications for these products, which are settled against benchmark bunker prices published by Platts and are cleared through the ECC (Nasdaq) and SGX clearing-houses. Next, the CME Group offers a wide variety of over 100 futures contracts on fuel oil across all regions of the world. Table 9.6 presents these fuel oil futures for North America and serves to illustrate the breadth of the bunker futures market. In December 2018, as a response to the environmental regulations imposed by the IMO 2020, the CME Group (NYMEX) introduced 11 futures contracts available for trading on Marine Fuel 0.5% (Platts), cleared via CME ClearPort. These are presented in Table 9.7.

Table 9.5 Marine Fuel Oil futures contracts by EEX (ECC), 2020

PRODUCT DESCRIPTION

180 CST FOB Cargoes Singapore 380 CST FOB Cargoes Singapore

3.5 % FOB Barges Rotterdam

CONTRACT SIZE

Nasdaq: 1 metric ton SGX: 100 metric tons

1 metric ton

MINIMUM TICK

Nasdaq: US$0.01 SGX: US$0.01

US$ 0.01

FINAL SETTLEMENT PRICE

The arithmetic average of Platts daily spot assessments in the contract month

CONTRACT SERIES

Months, quarters and calendar years out to a maximum of 36 months

SETTLEMENT

The first business day following the expiry day

Source: EEX

Table 9.6 Marine Fuel Oil futures contracts by CME Group (NYMEX) for the North America region, 2020

Product name

Gulf Coast HSFO (Platts) Futures

New York Harbor Residual Fuel 1.0% (Platts) Futures

NY 1% Fuel Oil (Platts) vs. Gulf Coast HSFO (Platts) Futures

NY 3.0% Fuel Oil (Platts) vs. Gulf Coast HSFO (Platts) Futures

Gulf Coast HSFO (Platts) Crack Spread Futures

Gulf Coast HSFO (Platts) BALMO Futures

Gulf Coast HSFO (Platts) Crack Spread BALMO Futures

NY 1% Fuel Oil (Platts) vs. Gulf Coast HSFO (Platts) BALMO Futures

NY 3.0% Fuel Oil (Platts) Futures

NY 3.0% Fuel Oil (Platts) BALMO Futures

NY 1% Fuel Oil (Platts) Crack Spread BALMO Futures

New York Harbor Residual Fuel (Platts) Crack Spread Futures

New York Harbor 1.0% Fuel Oil (Platts) BALMO Futures

Source: CME Group (NYMEX)

Note: See notes of tables in Chapter 5.

Table 9.7 Marine Fuel Oil (0.5%>) futures contracts by CME Group (NYMEX), 2020

Product description

Product size

Block minimum

Exchange fees*

Cash settlement fees

Panel A: US Gulf Coast

USGC Marine Fuel 0.5% Barges (Platts) Futures

1,000 Barrels

10

$0.85*/ $1.35

$0.10

USGC Marine Fuel 0.5% Barges (Platts) (mt) Futures

1,000 Metric Tons

5

$7.00*/$9.00

$1.00

USGC Marine Fuel 0.5% Barges (Platts) BALMO Futures

1,000 Barrels

10

$0.85*/ $1.35

$0.10

USGC Marine Fuel 0.5% Barges (Platts) (mt) BALMO Futures

1,000 Metric Tons

5

$7.00*/$9.00

$1.00

Table 9.1 (Continued)

Product description

Product size

Block minimum

Exchange fees*

Cash settlement fees

USGC Marine Fuel 0.5% Barges (Platts) vs. Gulf Coast HSFO (Platts) Futures

1,000 Barrels

10

$0,857 $1.35

$0.10

USGC Marine Fuel 0.5% Barges (Platts) vs. Gulf Coast HSFO (Platts) BALMO Futures

1,000 Barrels

10

$0,857 $1.35

$0.10

USGC Marine Fuel 0.5% Barges (Platts) (mt) vs. European FOB Rdain Marine Fuel 0.5% Barges (Platts) Futures

1,000 Metric Tons

5

$7.007$9.00

$1.00

USGC Marine Fuel 0.5% Barges (Platts) (mt) vs. European FOB Rdain Marine Fuel 0.5% Barges (Platts) BALMO Futures

1,000 Metric Tons

5

$7.007$9.00

$1.00

Panel B: Europe

European FOB Rdain Marine Fuel 0.5% Barges (Platts) Futures

1,000 Metric Tons

5

$7,007 $9.00

$1.00

Mini European FOB Rdain Marine Fuel 0.5%> Barges (Platts) Futures

100 Metric Tons

5

$0,807 $1.00

$0.10

Micro European FOB Rdain Marine Fuel 0.5%> Barges (Platts) Futures

10 Metric Tons

5

$0,257 $0.30

$0.01

European FOB Rdain Marine Fuel 0.5% Barges (Platts) BALMO Futures

1,000 Metric Tons

5

$7,007 $9.00

$1.00

Mini European FOB Rdain Marine Fuel 0.5%> Barges (Platts) BALMO Futures

100 Metric Tons

5

$0,807 $1.00

$0.10

European FOB Rdain Marine Fuel 0.5% (Platts) vs. European 3.5% FOB Barges (Platts) Futures

1,000 Metric Tons

5

$7,007 $9.00

$1.00

European FOB Rdain Marine Fuel 0.5%» (Platts) vs. European 3.5% FOB Barges (Platts) BALMO Futures

1,000 Metric Tons

5

$7,007 $9.00

$1.00

Panel C: Singapore

Singapore FOB Marine Fuel 0.5% (Platts) Futures

1,000 Metric Tons

5

$7,007 $9.00

$1.00

Mini Singapore FOB Marine Fuel 0.5% (Platts) Futures

100 Metric Tons

5

$0,807 $1.00

$0.10

Micro Singapore FOB Marine Fuel 0.5% (Platts) Futures

10 Metric Tons

5

$0,257 $0.30

$0.01

Singapore FOB Marine Fuel 0.5% (Platts) BALMO Futures

1,000 Metric Tons

5

$7,007 $9.00

$1.00

Mini Singapore FOB Marine Fuel 0.5% (Platts) BALMO Futures

100 Metric Tons

5

$0,807 $1.00

$0.10

Singapore FOB Marine Fuel 0.5% (Platts) vs. Singapore 380 CST Fuel Oil (Platts) Futures

1,000 Metric Tons

5

$7,007 $9.00

$1.00

Source: CME Group (NYMEX)

Note: * indicates fees for members of the CME Group (NYMEX).

The ICE also offers a number of Fuel Oil futures contracts cleared through IFEU, which are presented in Table 9.8. A full contract specification is presented in Table 9.9 for the contract Fuel Oil 180 CST Singapore Future. Finally, the SGX offers some fuel oil related contracts, these are presented in Table 9.10.

Table 9.8 Fuel Oil futures contracts by ICE (IFEU), 2020

Product name

Fuel Oil 180 CST Singapore Future

Fuel Oil 3.5% FOB Rotterdam Barges Future

Fuel Oil Diff— Fuel Oil 380 CST Singapore vs 3.5% FOB Rotterdam Barges Future

Fuel Oil Diff- USGC HSFO (Platts) vs Fuel Oil 3.5% FOB Rotterdam Barges (Platts) Future (in bbls)

Fuel Oil Diff- Middle East Fuel Oil 180 CST FOB Arab Gulf (Platts) vs Fuel Oil 180 CST Singapore (Platts) Future

Fuel Oil Outright - USGC HSFO (Platts) Future

Fuel Oil Crack - Fuel Oil 3.5% FOB Rotterdam Barges vs Brent 1st Line Future

Source: ICE

Table 9.9 Full contract specifications for the Fuel Oil 180 CST Singapore Future by ICE (IFEU), 2020

Description

A monthly cash settled future based on the Platts daily assessment price for 180 CST Singapore Fuel Oil

Market Specifications

Trading Screen Product Name

Trading Screen Hub Name

180cst Sing

Contract Size

1,000 metric tonnes

Unit of Trading

Any multiple of 1,000 metric tonnes

Currency

US Dollars and cents

Trading Price Quotation

One cent ($0.01) per metric tonne

Settlement Price Quotation

One tenth of one cent ($0,001) per metric tonne

Minimum Price Fluctuation

One tenth of one cent ($0,001) per metric tonne

Last Trading Day

Last Trading Day of the contract month

Floating Price

In respect of daily settlement, the Floating Price will be determined by ICE using price data from a number of sources including spot, forward and derivative markets for both physical and financial products.

Final Settlement

In respect of final settlement, the Floating Price will be a price in USD and cents per metric tonne based on the average of the mean of the high and low quotations appearing in the “Platts Asia-Pacific/Arab Си//' Marketscan" under the heading “Asia Products" subheading “Singapore” and “FOB Singapore” for “HSFO 180 CST (S/mt)” for each business day (as specified below) in the determination period.

Final Payment Date

Two Clearing House Business Days following the Last Trading Day

Business Days

Publication days for Platts Asia-Pacific/Arab Gulf Marketscan

Clearing Venues

ICEU

Source: ICE

Table 9.10 Fuel Oil futures contracts by SGX, 2020

Product

SGX Argus LSFO 0.5% Singapore Bunker Index Futures

SGX Platts Gasoil FOB Singapore Index Futures

SGX Platts Marine Fuel 0.5% FOB Singapore Index Futures

SGX Platts Singapore FO ISOcst Index Futures

SGX Platts Singapore FO 380cst Index Futures

Source: SGX

The swap contract

Figure 9.3 The swap contract

 
Source
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