IMO2020: FIS Looks to Establish December Premium for 0.50%S VLSFO of $200

Tuesday February 5, 2019

Freight Investor Services (FIS) has executed the first trade on Platts' Singapore FOB Marine Fuel 0.5% futures contract, in a move aimed at establishing a December 2019 premium for IMO2020 compliant VLSFO of $200/mt.

The deal was brokered on a spread basis against Platts' December 2019 Singapore 380 HSFO price.

With composition, supply levels, and pricing for the new fuels still very much unknown, Chris Hudson of the FIS Bunker desk said the trade was made to "provide a degree of price certainly for the buyer ahead of the expected increase in low sulphur premiums."

How much stock buyers put into the trade remains to be seen: There was, perhaps notably, no mention of any volume in FIS' press release accompanying the Feb 1 trade, while Hudson said there was a "need for owners with scrubbers fitted vessels to benefit from a wide hi/lo price differential."

Comments made to Reuters by CME Group director Nicolas Dupuis indicated the trade was for a volume of 1,000 mt. For comparison, Singapore's average stem size in 218 was 1,262 mt.

"My suspicion is it is good marketing rather than a real chance to start fixing any volume for the ship owner at this point," NSI's Paul Hardy said in Friday's newsletter.

"The liquidity should only come once actual physical cargoes are being traded and the index stops being manipulated with spurious bid/offers. Expect this to kick in c. Q3 2019."

As Ship & Bunker previously reported, Platts has listed eleven IMO2020-centric contracts on the CME Globex electronic platform as of December 9.

With early January trades indicating a premium of around $40/mt to HSFO in Singapore, at the start of February that premium had dropped to $30/mt.

The global 0.50% sulfur cap for marine fuel comes into force from January 1, 2020.

* This story was updated to reflect subsequent comments on the volume of the trade