<article><p class="lead">Three trading firms have completed the first overseas delivery of very low-sulphur fuel oil (VLSFO) on the Shanghai International Energy Exchange (INE) futures contract, the INE said.</p><p>Global trading firms Trafigura and Freepoint and Chinese-owned China-Base Resources bought a combined 3,500t of VLSFO on the INE for second-half January loading from the Universal Terminal in Singapore, which is part-owned by state-controlled PetroChina International. The deal was done in early January, market participants said.</p><p>The VLSFO has now been delivered. This is the first overseas delivery of the INE VLSFO contract, and comes less than two months after the exchange said in November it was seeking industry feedback on the <a href="https://direct.argusmedia.com/newsandanalysis/article/2162319">overseas delivery plan</a>. The INE and PetroChina International, a subsidiary of China's biggest upstream firm PetroChina, signed a <a href="https://direct.argusmedia.com/newsandanalysis/article/2163524">deal</a> on overseas deliveries later that month. </p><p>The deal included a premium, reflecting the cost of swapping a domestic for overseas delivery. Under INE rules, such a deal is classified as a domestic delivery with overseas loading, requiring a warrant to be registered for delivery into a Chinese futures contract. The cargo will have to be deregistered and converted a spot cargo, which can be swapped for an overseas delivery.</p><p>PetroChina International, as operator of the delivery tank, offers a daily guided overseas delivery premium against the futures contract settlement on expiry. The final premium is negotiated with the company. The premium offered is for overseas loading in 15-30 days. </p><p>The premium for the 3,500t overseas delivery was offered at 15 yuan/t ($2.30/t), which translates into a calculated outright price of about $412/t, based on the settlement price of the February VLSFO contract at $409.75/t on 4 January, when market participants said the deal may have been done. The actual negotiated premium is unclear.</p><p>The physical Singapore 0.5pc sulphur marine fuel cargo price was at $409/t on 4 January, below the cost of the delivery. This, and the small volumes involved in the deal, indicate it may have been done on a trial basis rather than motivated by profit.</p><p>Trafigura resold the VLSFO it bought through the deal to the Singapore bunker market via its TFG Marine bunker arm, while Freepoint sold its supply to Indonesia's state-owned Pertamina, the INE said.</p></article>
