Abu Dhabi to start trading crude futures from March

Abu Dhabi will open a commodities exchange in March to rival those of Middle Eastern neighbours, letting investors trade its crude using futures contracts for the first time.

The ICE Futures Abu Dhabi exchange will open on March 29 and offer contracts based on the emirate’s flagship Murban crude grade, pending regulatory approvals, Intercontinental Exchange said in a statement on Monday.

The Atlanta-based operator of trading and clearing platforms is setting up the exchange with government producer Abu Dhabi National Oil Co. (ADNOC) and other oil suppliers.

Abu Dhabi is the capital of the United Arab Emirates – OPEC’s third-largest producer – and it holds most of the UAE’s oil. Murban crude, pumped from onshore fields, comprises more than half of the country’s output, now at around 2.6 million barrels daily.

“This trading platform will operate at the heart of growth markets and offer great value for producers and customers alike,” ADNOC chief executive officer Sultan Al Jaber said on Monday during a virtual conference from the capital.

ADNOC also will begin trading its full range of refined products next month, he said. The company plans to so through ADNOC Global Trading, a joint venture with Italy’s Eni SpA and Austria’s OMV AG.

By selling its crude through futures, Abu Dhabi will let the market determine the price. That’s a significant change for a producer that until this year fixed its pricing retroactively, effectively telling buyers the cost of barrels purchased a month earlier.

ADNOC wants Murban futures to serve as a regional benchmark for Gulf barrels heading east. Benchmarks help buyers in Asia, the biggest and fastest-growing oil market, to compare crudes from the US, Europe, Africa and the Middle East.

Oman and the UAE emirate of Dubai joined with CME Group in 2007 to start the Dubai Mercantile Exchange, which trades Omani crude futures. Oman, Dubai and Saudi Arabia price off those contracts.

Most other producers in the Gulf region, which pumps about a fifth of the world’s oil, base their monthly pricing on Dubai and Oman crude-price assessments by S&P Global Platts.

Murban is lighter and contains less sulfur than most Middle Eastern crudes, making it easier to refine. It generally fetches higher prices and is similar in quality to Brent crude, futures for which are traded on the London-based ICE Futures Europe Exchange.

Vitol Group, BP, Royal Dutch Shell and Total were among the nine oil traders and producers that joined as partners in the planned exchange last year. ADNOC pushed back the start from the first half of last year, initially due to the need for regulatory approvals and then as the coronavirus pandemic upended markets.

Brent crude has doubled since April, when the Organization of Petroleum Exporting Countries and its partners agreed to cut output to meet plunging demand. Even so, the global benchmark is down about 35 per cent this year.