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Make Room, West Texas Intermediate and Brent. Murban Is Here.

The new crude futures contract could help weaken Saudi control of Mideast oil supply.

On March 29, Saudi Arabia’s control over Mideast oil supply could be loosened, possibly forever. On that day, traders on the Intercontinental Exchange (ICE) will begin buying and selling a futures contract based on Murban crude oil, which is produced by Abu Dhabi National Oil Co. Anyone who buys Murban oil will be able to sell it anywhere in the world, as they already can with West Texas Intermediate crude from the U.S. and Brent crude from Britain’s North Sea. The difference is that Murban volumes are much larger than those of the American and British crudes. The lack of destination controls will set Abu Dhabi apart from Saudi Arabia, which zealously controls who can buy and consume each shipment of its oil.

“Sooner or later, the action could weaken OPEC and the Coalition,” namely, oil-exporting countries that coordinate with OPEC, energy economist Philip Verleger of PKVerleger LLC writes in the March 8 issue of his newsletter, Notes at the Margin. “Their ability to sustain prices will be broken.”