Dubai, May 23, 2016 - The first trade in Middle East fuel oil derivatives has taken place on the DME, the leading east of Suez energy exchange.
DME recently listed Middle East 180cst and 380cst high-sulfur fuel oil (HSFO) for trading. The fuel oil contracts settle against the MOPAG 180cst and MOPAG 380cst assessments provided by price reporting agency Platts.
The listing allows traders to directly hedge fuel oil delivered in the Gulf region and to trade the important spread between the Middle East and Singapore fuel oil markets. This is a significant step towards helping the Gulf realize its full potential as a refined product trading hub.
The trade was for 7,000 metric tons (appx 45,000/barrels) of July 180 CST fuel oil (product code DHE) and was concluded between Vitol, the world’s largest independent energy trader, and Aegean Marine, an international marine fuel specialist and one of the largest operators in the Middle East. The transaction was brokered by the Dubai office of Freight Investor Services (FIS).
Chris Bake, Member of the Executive Committee, Vitol said: “Vitol is pleased to be part of the first trade in these new DME contracts. Vitol is strongly committed to the development of the Fujairah oil hub and this new derivatives contract represents a big step forward in Fujairah’s evolution from a pure logistics hub into a major trading centre.”
Owain Johnson, Managing Director, DME said “In these volatile times, there is clearly a healthy appetite among regional market participants for a way of managing price risk at Fujairah and the DME is happy to serve this market need.”
FIS’ Matt Stanley said: “FIS is delighted to have brokered the first trade in this new and potentially exciting market, which represents another first for FIS in commodity derivatives. FIS works consistently to support the development of new trading opportunities and through our local presence in Dubai, we have been closely involved in making these new fuel oil contracts a reality. Fujairah has become one of the most important trading hubs not just within the AG region but globally as well. Giving the market the ability to hedge fuel oil that is priced on the basis of physical AG quotes will not only serve to manage risk for regional traders but also assist arbitrage opportunities.”