Dubai to introduce bunker fuel futures
The Fujairah 380 CST High Sulphur Fuel Oil Futures Contract will commence trading on Dubai Gold & Commodities Exchange with six consecutive forward month contracts.
Dubai Gold and Commodities Exchange (DGCX) has announced that it will launch bunker fuel futures on October 30, 2006.
The move will allow tankers and other shipping in the Gulf to nail down the price of bunker fuel, which powers their engines, ahead of picking it up in Fujairah. Currently, most Gulf tankers buy the fuel in Singapore at the price of that day and get the bill as they leave.
Colin Griffith, DGCX chairman, said: “We are delighted to announce the launch of the first energy product for trade on DGCX. We hope to bring more such products to the market and provide an efficient platform for managing the price risk [that buyers and sellers] are exposed to.”
The Fujairah 380 CST High Sulphur Fuel Oil Futures Contract will commence trading on DGCX with six consecutive forward month contracts, starting with December 2006 as the near month contract. The contract will be traded in lots of 100 tonnes of 4.5%, 380 centistoke fuel oil.
Bunkering accounts for 80% of the total consumption of fuel oil in the UAE. The Port of Fujairah has been commonly ranked as the second largest bunkering facility in the world. Fujairah supplies about 12 million tonnes of bunker fuel annually. The proposed futures contract will facilitate price discovery nearer home for a commodity that plays such an important role in the region.