DME Oman Crude Oil Futures Contract
The Middle East holds the majority of the world's proven oil reserves, and there
is rapidly increasing demand for Middle East sour crude. Most of this increase
comes from Asia, which imports over two thirds of its crude oil from the Middle
East. However, until the launch of DME , there was no exchange traded Middle East Sour Crude
benchmark, which hindered risk management for Middle East Sour Crudes. The DME,
by listing the DME Oman Crude Oil Futures Contract, provided a mechanism for
price determination through a globally traded benchmark.
Introduction of a new marker
There is a clear opportunity for the establishment of
an exchange traded Middle East price benchmark.
The existing exchange-traded market benchmarks, WTI and
Brent, are unrepresentative of Middle East Sour Crude.
Middle East Sour Crude oil is qualitatively different
from other exchange markers, being considerably more
heavy or viscous (as measured by a lower API gravity)
and more "sour" (i.e.: with a higher sulphur content,
typically over 1%) than "sweet" crudes such as Brent and
WTI. The sweet-sour pricing differential can be highly
volatile, making sweet crude benchmarks an inadequate
tool with which to manage sour crude price risk.
The introduction of an exchange traded Middle East
sour crude contract has facilitated risk management of
sour crude exposure in the Middle East region, Asia and
beyond and provides the credit protection that
over-the-counter trades lack through the introduction of an
exchange clearinghouse to guarantee transactions.
Rationale for selecting Oman Crude oil
Historically, Dubai (Fateh) crude oil has been the region's primary pricing
benchmark for all crude oils heading to Asia. However, with Dubai crude oil
production volumes declining to less than four cargoes per month (less than
100,000 bpd), the introduction of a new exchange traded and physically backed
benchmark was widely supported by market participants. Oman crude is seen by most
industry participants as a preferred futures benchmark for a number or reasons:
- Oman crude oil quality is broadly representative
of other medium sour Middle East crude oils
- Oman crude oil has production volumes of
approximately 750,000 b/d. The production levels and
tradability of Oman crude oil are sufficient to
support benchmark status
- Oman is not a member of
OPEC, and Oman crude oil is not subject to
production quotas, crude oil destination or end-user
restrictions
- The Mina Al Fahal terminal facilities are
outside the Straits of Hormuz and can accommodate
variable cargo sizes and have minimal load port
restrictions on vessel draft. The facilities have
best in-class loading measurement and delivery
procedures
- The Government of Oman is politically neutral,
stable and pro-business and has been very supportive
of the DME's initiative. The DME enjoys significant
support from the Omani Government in achieving its
objectives and Oman's Ministry of Oil & Gas adopted
the DME Oman Crude Oil Futures Contract's daily
settlement price to price its crude oil from the
launch of the Exchange
- There are Multiple producers of Oman crude oil, rather
than a monopoly
More information:
If you want to know more about the DME Oman Crude Oil
Futures Contract, please download and read the following
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