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
Figure 9.3 The swap contract
