Murban futures launch and new DME trading platform offer more transparency to oil markets

Abu Dhabi aims to establish its flagship crude grade as a key marker for global trade in oil

A total of 38,712 contracts priced against Murban have traded on the Ifad exchange located at the Abu Dhabi Global Market since the launch on March 29. Courtesy Adnoc
A total of 38,712 contracts priced against Murban have traded on the Ifad exchange located at the Abu Dhabi Global Market since the launch on March 29. Courtesy Adnoc

The launch of Abu Dhabi’s Murban crude futures contract and the establishment of a new platform at the Dubai Mercantile Exchange trading different grades provide greater pricing transparency and offer more choice to the market, an analyst said.

Last week, the DME , which trades Oman’s crude oil futures contracts from the Dubai International Financial Centre, unveiled a trading platform that will allow several crude grades to be traded through the exchange.

The exchange will allow regional grades such as Dubai, Upper Zakum, Murban, Basrah Light, Basrah Heavy, Al Shaheen and Oman that are currently traded bilaterally to be priced as a differential to its exchange-traded Oman futures contracts.

"The ACE [Alternative Crude Ecosystem by the DME] platform increases transparency in that market. Because with that with transparency, there comes, I think more confidence and trust in how markets are being traded and, you know, this gives choice," said Vera Blei, global director, oil and liquefied natural gas markets at S&P Global Platts.

Ms Blei was speaking to reporters on Wednesday during an online briefing organised by Dubai-based energy consultancy Gulf Intelligence.

The DME Oman crude grade, which is based on a medium gravity, high sulphur crude is used by several regional players, including Saudi Aramco.

Trading in Murban crude futures contracts started at the end of March as Abu Dhabi aims to establish its flagship crude grade as a key marker for global trade in oil.

The launch of the contracts priced against Murban, a light, sweet crude produced in Abu Dhabi, is a close match for Brent, which trades in a similar grade of crude.

Brent accounts for two-thirds of global trade in crude and is the international marker for trade in the commodity. West Texas Intermediate is another key crude commodity benchmark, but largely factors in domestic fundamentals in the US.

The crude futures registered the highest volume of trade on Wednesday, with a record 14,419 contracts traded.

The contracts are equivalent to 1,000 barrels each, and the volumes traded on Tuesday are equivalent to nearly 14.4 million barrels of Murban crude, according to the Ice Futures Abu Dhabi, on which the futures trade.

Murban futures for June delivery were down 1.16 per cent at $61.18 per barrel at 6.59pm UAE time, while Brent was down 0.8 per cent at $62.67 per barrel.

Murban, a premium grade, is popular among Asian buyers, who increasingly dominate the global trade in oil.

""In commodity markets you would typically look at 12 months’ worth of data to analyse a new benchmark and it typically takes time for a new benchmark to establish itself in the context of the wider market," said Ms Blei.

One million barrels per day of Murban crude is available for export. The UAE, which accounts for 4.2 per cent of global crude output, has the capacity to produce 2 million bpd of Murban.

Abu Dhabi National Oil Company set up the Ice Futures Abu Dhabi exchange with Intercontinental Exchange, the parent company of the New York Stock Exchange, at Abu Dhabi Global Market. Ifad is supported by several of Adnoc's trading and upstream partners. The Abu Dhabi producer is ensuring greater transparency in the trade of Murban by allowing market participants to have an insight into available volumes for the grade for 12 months.

Adnoc publishes an availability report on Murban export volumes on its website.

Ahead of the launch of trading, the national oil company removed destination clauses for the sale of its crude, which was a prior requirement.

Adnoc's other crude grades – Upper Zakum, Das and Umm Lulu – will be priced at a differential to Murban.

The contract for future delivery can be traded 22 hours a day, five days a week.

Traders will study the expiry of the first Murban crude futures contract to understand its impact on the markets, Ms Blei said.

"When it comes down to the first expiry [of the contract], the market will be eagerly looking at how physical delivery is going to work, how the official selling prices are going to be set," she added.

Updated: April 8, 2021 09:23 PM

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