Oman and Dubai Exchange Advance Toward Mideast Futures Contract
Oman's Ministry of Oil and Gas (MOG) and the Dubai Mercantile Exchange (DME) have identified the elements necessary to create a sucessful, physically linked Middle East sour crude oil futures contract, the DME reports.
The Dubai exchange said that the milestone follows a MOG/DME working group's analysis of the benefits and implications of developing an Oman-backed physical crude oil futures contract. DME contends that the current market situation presents an ideal opportunity for the development of a liquid crude oil futures benchmark.
Although the Middle East is the world's largest hydrocarbon region, it has yet to develop a transparent futures contract. The two leading crude oil futures benchmarks, West Texas Intermediate and Brent, reflect the value of sweet crude oil--not the sour crude oils of the Middle East.
The working group, commissioned by a February memorandum of understanding between MOG and DME, has been examining this anomaly in the context of growing market challenges and the need for a robust and liquid price discovery mechanism for Middle East crude. It includes senior professionals from MOG, Oman's Ministry of Finance, Petroleum Development of Oman, the New York Mercantile Exchange (NYMEX), and the DME.
The working group reported its findings to a steering committee that includes senior leaders from MOG and DME. The steering committee unanimously approved the findings. Furthermore, they instructed the working group to engage the energy and financial communities
on the specific terms of the draft futures contract. The planned launch date of the contract is the fourth quarter of this year.
"The creation of a successful,physically linked Middle East sour crude oil futures contract is a concept we sincerely support, given our role in the pricing of Middle Eastern crude," said H.E. Nasser bin Khamis Al Jashmi, Oman's undersecretary of oil and gas. "In this respect, we believe the timing is opportune to lead this initiative and very much look forward to receiving market feedback on the contract."
"We are delighted to have reached this milestone with Oman's Ministry of Oil and Gas," added DME chairman Ahmad haraf. "Together, we will seek to build on the valuable and long-standing relationship between Oman and Dubai to develop a Middle East sour crude oil futures contract that will be traded on the DME."
"This historic initiative has positive implications for the entire region and will open alternative investment channels for the development of its energy and capital markets," concluded Gary King, DME chief executive. "By working closely with Middle Eastern oil producers, who are supplying the growing energy demands of regional and Asia Pacific economies, the new electronic exchange will provide the means to manage price and credit risk in a transparent and open marketplace."
The DME is a joint venture between Tatweer, a member of Dubai Holding, and NYMEX, Inc.