The Dubai Mercantile Exchange plans to ask crude buyers in Asia to lobby Saudi Arabia and other oil producers in the Persian Gulf to adopt its Oman crude futures contract as a benchmark for their official selling prices.
Adoption of the contract as a benchmark must be “customer- driven,” Kendal Vroman, managing director for commodity products at CME Group Inc. (CME), said in Dubai. Chicago-based CME, which last month doubled its stake in the Dubai exchange to 50 percent, will use its sales and marketing team in Asia to promote the Oman contract as a hedging tool, he said.
The energy-focused DME has been seeking to establish the Oman contract, which gives investors the option of taking physical deliveries of crude, as the pricing standard for oil sales to Asia. The exchange hopes that by boosting its trading volume it can persuade buyers of Middle Eastern oil to tell producers that the Oman contract would be their best benchmark for crude sold under long-term contracts, Vroman and DME Chairman Ahmad Sharaf told reporters at a briefing in Dubai.
The more popular standard for Middle Eastern crude is the Dubai price assessment published by Platts, an energy- information division of McGraw-Hill Cos.
The Dubai bourse’s average daily volume rose to a record last month, with a mean of 5,378 Oman crude contracts trading each day, DME data show. Trading reached a single-day high on Feb. 15 when 10,142 contracts were bought and sold. “We think we’re close” to a breakthrough to wider acceptance, Vroman said.
Oman, the largest Middle Eastern oil producer that’s not a member of the Organization of Petroleum Exporting Countries, uses monthly averages generated by the exchange to set the official selling price for its crude. Dubai, the second-biggest sheikhdom in the United Arab Emirates, began using the DME contract as a benchmark for its oil in 2009.
The DME may offer trading in other products such as jet fuel or liquefied natural gas, Sharaf said, without specifying dates.
The exchange’s management board is looking for a new chief executive officer after Thomas Leaver said this month he was resigning from the post. The board is compiling a shortlist of candidates to be interviewed in coming months, Sharaf said.
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