Dubai Mercantile Exchange in bid to boost oil trade by 40%

The increase will come as the exchange adds members.

The Dubai Mercantile Exchange (DME), the platform for trading in the Oman crude futures contract, expects contract volumes to rise by up to 40 per cent next year.

The increase will come as the exchange adds members and looks for new ways to boost oil trading that reached US$18 billion last year, its chief said on Wednesday.

The DME, which trades physical oil, expects to close this year with average trading of about 8,700 contracts a day, an approximately 34 per cent increase over the 6,500 average of contracts traded a day last year, said Christopher Fix, the DME chief executive, at the Platts Middle East Crude Oil Summit in Dubai.

“We have been growing at a very steady rate of 30 to 40 per cent [a year],” said Mr Fix. “So we just see that we are going to continue a very strong growth trajectory in 2015.”

The DME is 50 per cent owned by the CME Group, which also owns Nymex, and is the world’s largest futures exchange owner. Oman Investment Fund, the Arabian Gulf state’s sovereign wealth fund, owns 29 per cent, Dubai Holding 9 per cent and the remaining 12 per cent is held by a number of investors including Royal Dutch Shell.

The exchange, which only trades Oman crude, is looking for ways to boost trading of the benchmark, which has been used by Dubai to price its oil since 2009.

Oman, the largest Middle Eastern oil producer that is not a member of Opec, uses the monthly averages generated by the exchange to price its crude. The benchmark that is used by most Middle East crude producers is Platts’ Dubai price assessment.

The DME, which was set up in 2007, has signed agreements with exchanges in China, Japan and South Korea to boost business and capitalise on the spread difference between the DME Oman contract and other contracts in Asia.

“Naturally there is going to be a difference whether it’s the freight element or the currency element or the volatility of the price during the voyage, so we are going to quantify and find a way for us to be able to allow our customers to trade that and that’s what I mean by a spread,” said Mr Fix.

“In the US, there is a spread between the WTI contract and Brent. Traders like to be able to have that volatility and capture it and trade it,” he said.

“We are going to mimic the same concept across these other exchanges [in Asia] in the same fashion.”

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Published: December 10, 2014 04:00 AM


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