BY CONTINUING TO USE THIS SITE, YOU ARE AGREEING TO OUR USE OF COOKIES. REVIEW OUR
COOKIE NOTICE

Register with us today

and in less than 60 seconds continue your access to:Latest news headlinesAnalytical topics and featuresCommodities videos, podcast & blogsSample market prices & dataSpecial reportsSubscriber notes & daily commodity email alerts

Already have an account?

Log in to register

Forgot Password

Please Note: Platts Market Center subscribers can only reset passwords via the Platts Market Center

Enter your Email ID below and we will send you an email with your password.


  • Email Address* Please enter email address.

If you are a premium subscriber, we are unable to send you your password for security reasons. Please contact the Client Services team.

IF you are a Platts Market Center subscriber, to reset your password go to the�Platts Market Center to reset your password.

In this list
Shipping

New 0.5% swap to limit bunker fuel price risk in 2019 as sulfur cap looms

Steel

Heavy Melting Scrap 1/2 80:20 CFR Turkey

Shipping

Platts Dirty Tankerwire

Commodities | Metals | Non-Ferrous | Shipping | Autos & Capital Goods | Materials | Building & Construction | Transportation | Aerospace & Defense | Financial Services

Aluminum Symposium

Shipping

Container traffic at Gothenburg, Sweden, up 17% in 2018

New 0.5% swap to limit bunker fuel price risk in 2019 as sulfur cap looms

London — Marine fuel traders now have the opportunity to hedge a 0.5% instrument against the drastic fluctuations that await the fuel oil industry before the impending 0.5% global marine sulfur cap in 2020, as the first indication of a new derivative instrument for 2019 that reflects fuel oil of 0.5% sulfur was announced this week.

Not registered?

Receive daily email alerts, subscriber notes & personalize your experience.

Register Now

"This should be interesting, it's good for the fuel market," a broker said.

The market has so far lacked a 0.5% hedging instrument and at present traders are using ICE low sulfur gasoil futures, the fuel oil hi-lo -- the premium of 1% FOB NWE cargoes over 3.5% FOB Rotterdam barges -- and even crude futures to take positions in preparation for the International Maritime Organization's 0.5% cap.

New York Mercantile Exchange, or NYMEX, will list 11 marine fuel 0.5% futures contracts for trading on the CME Globex electronic platform on December 9, 2018, for trading from December 10, 2018, CME Group said Tuesday. Liquidity on the 0.5% swap contracts is as yet unknown, but traders point towards increased activity through 2019 as more clarity has been provided, with physical demand for 0.5% marine bunker fuel picking up towards Q4 2019.

"It will be interesting to see the uptake when they list [the contracts]," a fuel oil trader said.

Looking down the curve, after a period of weakness in 2020 the fuel oil market is expected to settle or strengthen as the market adjusts to the new regulations, sources said. The calendar 2019 3.5% FOB Rotterdam fuel oil crack was assessed Tuesday at minus $11.20/b, dropping to minus $18.9/b for 2020 before settling at minus $16.60/b for 2021, according to data from S&P Global Platts.

While hedging is an innate strategy of trading houses, not every bunker player prioritizes it. The uncertainty over product availability and price at various ports might incentivise hedging their bunker fuel price risk to reduce exposure to the volatility expected come 2020. Bunkering costs make a up significant portion of a shipowners' operational costs, therefore mitigating potential losses might become more of a priority as fuel oil costs rise.

The new contracts, which will be cleared via CME ClearPort, will settle against S&P Global Platts physical Marine Fuel 0.5% assessments, some of which will be launched January 2, 2019.

Oilgram News

Platts Oilgram News brings fast-breaking global petroleum and natural gas news every day covering supply and demand trends, corporate news, government actions, exploration, technology, and much more. Click on the link below and we will set you up with a free trial.

Free Trial

The first listed contract is for April 2019. Monthly contracts will be listed for 2019 and the following three calendar years. Monthly contracts for a new calendar year will be added following the termination of trading in the December contract of the current year. Trading for the contract will end on the last trading day of the month.

--Staff, newsdesk@spglobal.com

--Edited by Jonathan Loades-Carter, jonathan.carter@spglobal.com