The Dubai Mercantile Exchange’s new chief executive officer said he aims to tap Persian Gulf financial markets and banks for capital to help fund and expand trading in crude oil and refined products.
Christopher Fix, a former BNP Paribas SA executive who joined the DME last month, said the exchange has spoken with “half a dozen” regional lenders about ways to facilitate funding for energy trading. The aim is “to get Arab banks to finance Arab oil,” he said at an energy forum in Dubai today.
The DME, the platform for trading in the Oman crude futures contract, does about $1.5 billion in oil transactions a month, mainly financed by European or U.S. lenders, Fix said. European and U.S. banks tightened lending after the global financial crisis, adding to constraints on some trading companies at the same time as higher commodity prices made it more expensive to purchase oil and refined products.
Trading in Oman futures started in 2007 and monthly transactions on the exchange set the official price from Omani crude exports. Dubai, the second-biggest sheikhdom in the United Arab Emirates, began using the contract as a benchmark for its oil in 2009. The more popular standard for Middle Eastern crude is the Dubai price assessment published by Platts, an energy-information division of McGraw-Hill Cos.
While the DME still aims to have the Oman futures contract adopted by other Middle Eastern oil producers, Fix said the exchange was making a “massive change of strategy.” To boost trading volume, the DME will improve the trading platform to attract more market participants like refiners and other buyers, rather than relying on its as a benchmark by producers, Fix said.