Oman implements Historic
change to Pricing of Crude Oil
Muscat, Oman
- 14 November, 2006: The Sultanate of Oman’s
Ministry of Oil and Gas (MOG) and the Dubai Mercantile Exchange Limited (DME)
today announced that Oman will adopt forward pricing of its crude oil based
on the daily settlement price of the DME's Oman Crude Oil Futures Contract,
due to start trading on launch of the Exchange. The DME, is a joint venture
between the New York Mercantile Exchange, Inc (NYMEX)
and Tatweer, a member of Dubai Holding.
The ground-breaking decision to abandon its current practice of
retroactively pricing the Sultanate’s crude oil is further evidence of the
Oman Government’s continuing support for price transparency.
The pricing decision will be welcomed widely by the industry and follows
extensive market consultation by the joint Oman – DME working group that was
instrumental in developing the Oman Crude Oil Futures Contract earlier this
year. The working group consists of senior professionals from Oman’s MOG,
Ministry of Finance, Petroleum Development of Oman, the New York Mercantile
Exchange Inc. (NYMEX) and the DME. The working group met in Oman last week
with the MOG and with DME's senior management to discuss the Exchange’s
progress, the working group’s findings and Oman’s crude oil pricing
methodology.
Making the announcement, H.E.Dr. Mohammed Hamed Al Rumhy, Minister of Oil &
Gas, Oman said: "We believe this is one of the most significant
developments in the Middle Eastern oil market for years, addresses industry
needs, and is entirely appropriate given Oman’s role in pricing the region’s
crude oil.
"By pricing Oman’s crude oil directly off the Oman Crude Oil settlement
price when it starts trading on the new Exchange, we are giving a resounding
and unequivocal demonstration of our commitment to the DME's long-term
success.
"Of course MOG will be closely monitoring price
discovery to ensure that the contract is trading in a
robust manner reflecting fair market value for Oman
Crude Oil. The Ministry will support the Dubai
Mercantile Exchange by using it as the pricing
methodology for Oman oil so long as it performs well and
guarantees fair prices that match those of the global
markets."
Ahmad Sharaf, Chairman of the DME commented: "The Sultanate of Oman’s
historic decision has a profound significance not just for the DME but the
entire region and industry. It springs from the valuable and long-standing
relationship between Oman and Dubai. Coupled with the regional and industry
expertise of Tatweer and NYMEX, Oman's commitment will be a major factor in
the successful launch of a world class energy futures
exchange in Dubai."
He added: "Since we announced the creation of the Oman Crude Oil Futures
Contract earlier this year, we have continued to work closely with our
partners in Oman and consulted widely within the industry. Some observed
that our prospects of success would be greatly enhanced by a change to
Oman’s pricing policy. So we are naturally delighted by this development."
Gary King, Chief Executive Officer of the DME, added: "This latest milestone
in the complex and challenging process of creating the Middle East's first
energy futures exchange gives us renewed confidence in the success of the
DME. We continue to make great progress on construction and fitting out of the
Exchange’s facility in Dubai, have chosen a world-class technology platform,
created a unique membership structure, engaged in the regulatory approval
process with the Dubai Financial Services Authority, developed the world’s
first Middle East crude oil futures contract and last but not least, secured
the support of a major producing nation.
"
"All our efforts are now focused on working with
the DME's partners to bring these many different
elements together."
The establishment of an exchange inside the Dubai International Financial
Centre (DIFC) and the associated clearing and settlement services to be
provided by the NYMEX Clearinghouse are subject to regulatory approval from
the Dubai Financial Services Authority (DFSA) and the licensing of the DME
as an Authorised Market Institution (AMI) to operate as an exchange.
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