The UAE potentially made history today when it sounded the starting pistol for its Murban crude oil futures, to be traded on the brand new ICE Futures Abu Dhabi exchange.
The price for what the UAE hopes to become a regional benchmark stood at $63.93 a little after midnight GMT, Reuters reports, adding that 2,132 lots of 1,000 barrels each were traded by that time, according to an ICE tweet.
The launch of the Murban futures is part of the UAE’s attempt to revolutionize trade in Middle Eastern oil. Per a Bloomberg report, the introduction of the futures removes the restraints that until now kept the spot market for oil closed off for large Middle Eastern producers, who either sold their crude directly to refiners or to the foreign companies operating their fields. This, Bloomberg noted, prevented buyers from reselling the oil or profiting from arbitrage deals.
“If successful — and I think the chances are good — Murban futures could be a pivotal moment for Middle East crude pricing,” according to Vandana Hari, founder of Singapore-based Vanda Insights. If “a sizable chunk of Middle Eastern crude trades freely in the spot market,” other Middle Eastern producers may follow suit with their own futures.
There are two benchmark contracts in the Middle East right now: the Dubai benchmark, operated by S&P Platts, and the DME (Dubai Mercantile Exchange) Oman. The Murban contract is tied to the most popular crude oil grade produced by Abu Dhabi’s ADNOC. Physical delivery of the oil bought under this contract will be made at the port of Fujairah in the UAE.
To ensure enough physical supply for deliveries, ADNOC has invested $900 million in building 40 million barrels worth of storage space near the port city. ADNOC produces around 2 million barrels of Murban daily.