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Platts exclusive: ICE to launch 0.5% futures contract in preparation for IMO 2020 global marine sulfur cap

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Platts exclusive: ICE to launch 0.5% futures contract in preparation for IMO 2020 global marine sulfur cap

London — The Intercontinental Exchange said this week that it will be launching 0.5% derivative instruments in preparation for the global marine sulfur cap in 2020, making it the second exchange this week to confirm such a move.

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"Subject to the completion of relevant regulatory processes, ICE plans to launch a range of new marine fuel oil futures contracts alongside the existing ICE fuel oil and highly liquid gasoil futures markets providing customers with a range of hedging tools to assist with the transition to the new IMO rules in 2020," a company spokeswoman told S&P Global Platts on Thursday.

The move, comes just after the New York Mercantile Exchange announced Tuesday that it is to list 11 marine fuel 0.5% futures contracts for trading on the CME Globex electronic platform from December 9, for trading from December 10.

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 spread -- the premium of 1% FOB NWE cargoes to 3.5% FOB Rotterdam barges -- and even crude futures to take positions in preparation for the International Maritime Organization's incoming 0.5% sulfur cap.

Liquidity in 0.5% swaps contracts is as yet unclear, but traders point toward increased activity through 2019 as more clarity has been provided, with physical demand for 0.5% marine bunker fuel likely to pick up towards the fourth quarter of next year.

--Eleni Pittalis, eleni.pittalis@spglobal.com

--Tamara Sleiman, tamara.sleiman@spglobal.com

--Edited by James Leech, james.leech@spglobal.com

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