Singapore's Apex to launch its first fuel oil futures contract

SINGAPORE (REUTERS) – Singapore-based Asia Pacific Exchange (Apex) plans to launch its first fuel oil futures contract on Thursday evening (April 11), targeting regional and international industry participants, a company spokesman said.

Each US dollar denominated 380-centistoke high-sulphur fuel oil (380-cst HSFO) contract will be for 10 tonnes of fuel oil that is physically deliverable against quality-assured 380-cst HSFO if held until expiry, the spokesman said.

The relatively small contract size is designed to cater for both large and small investors, including from China, while having the contract in US dollars should appeal to a broad range of industry participants, she said.

Trade liquidity for fuel oil futures in China has grown steadily since the launch of similar yuan-denominated futures contracts on the Shanghai exchange in July 2018.

The first contract months to trade will be from August 2019 to July 2020, with each expiring on the day before the start of the respective month.

There will be several trading windows for the contracts each day, timed to cover the S&P Global Platts Singapore Market on Close, Shanghai Futures Exchange (SHFE) and Intercontinental Exchange (ICE) platforms, the spokesman said.

To ensure quality standards are met, sellers can deliver the fuel oil to Apex approved storage facilities for inspection to warrant product specifications.

Depending on the performance of the 380-cst HSFO futures contract, Apex may subsequently launch similar low-sulphur fuel oil (LSFO) and marine gasoil (MGO) futures contracts that meet changing industry demands, the spokesman said.

Under International Maritime Organization (IMO) rules that come into effect from 2020, ships will have to use fuel with a sulphur content of 0.5 per cent or less, compared with 3.5 per cent now, forcing changes upon global shippers and oil refiners.