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DGCX to launch fuel oil contract

DGCX made this announcement yesterday during a special forum held in Singapore on the eve of APPEC 2006 conference, the biggest annual oil and gas gathering of delegates in the Far East. Colin Griffith Chairman, DGCX and Tilak Doshi, Executive Director, DMCC presented the details of the fuel oil contract specifications to be traded on DGCX and the delivery mechanism to the key players in the energy markets.

Speaking to Khaleej Times yesterday Framroze Pochara, Chief Executive of DGCX, said, “The fuel oil futures contract is fully deliverable if parties prefer to take physical delivery. All arrangements have been made in Fujairah where storages have been leased to facilitate delivery.”

Typically, in futures trading physical delivery is less. However, the region accounts for a huge share of the physical transactions. Bunkering accounts for 80 per cent 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. The port supplies approximately 12 million metric tonnes of bunker fuel annually. The proposed futures contract will facilitate price discovery nearer home for a commodity which plays such an important role in the region.

The exchange expects large volumes in fuel oil contracts from the region in addition to additional volumes from other major fuel oil trading centres such as Singapore and London. With 100 plus active brokers, the exchange is fast emerging a highly liquid futures exchange.

Fuel Oil will be the sixth futures product to be traded on DGCX. The Exchange went live in November 2005 with trading in gold futures contracts. Soon after, it introduced trading in silver futures in March 2006 and futures in 3 currency pairs (Euro/USD, GBP/USD and JPY/USD) in June 2006.The exchange is expected to launch steel futures before the end of this year. The Fujairah 380 CST High Sulfur 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 metric tonnes of 4.5 per cent sulphur, 380 centistoke fuel oil.

“With the introduction of fuel oil futures, DGCX will be in a unique position to offer futures trading in a diversified range of commodities — precious metals, currencies and now oil. We hope to bring more such products to the market and provide an efficient platform for managing the price risk to the participants exposed to the respective class of commodities,” said Griffith.