History was made today when the Middle East's first international energy futures and commodities exchange was launched by the Dubai Mercantile Exchange Limited (DME), a joint venture between Tatweer, a member of Dubai Holding, the New York Mercantile Exchange Inc. (NYMEX), and the Oman Investment Fund (OIF).
The first daily settlement price of the Oman contract, the Middle East's first and only physically-settled energy futures contract was US $64.09. This will be the first price used by the Sultanate of Oman's Ministry of Oil and Gas in calculating its Official Selling Price (OSP). The Ministry's pricing formula will be the arithmetic average of the Oman Crude Oil Futures Contract's daily settlement prices over each calendar month. The average set in June will price Oman's August cargoes.
At precisely 2:00am Dubai time, trading began of the DME's Oman Crude Oil Futures Contract and two financially settled futures contracts, the Brent-Oman Spread Contract and the WTI-Oman Spread Contract. The time-zone trading gap between European and Asian markets has now been bridged by the DME which provides a platform for the trading of energy futures and addresses the need for price discovery.
Today's announcement follows this week's decision that Dubai will adopt forward pricing of its crude oil based on the daily settlement price of the DME's Oman contract. The Sultanate of Oman made a similar commitment to price transparency late last year in what was seen as a major milestone in the development of the DME.
Welcoming the launch, DME Chairman Ahmad Sharaf said: "This is an historic and long-awaited day and marks the culmination of almost three years of intensive planning and preparation. The DME is now establishing a global benchmark for the pricing of Middle East sour crude oil through the trading of our Oman Crude Oil Futures Contract.
"On behalf of the DME Board of Directors, I want to thank all those people who have made this momentous event possible. Our partners, Tatweer, NYMEX and the Oman Investment Fund, and our members have supported us throughout and demonstrated great vision and faith in the DME enterprise. Our staff have worked tirelessly and shown exceptional dedication from the very beginning."
Chief Executive Officer of the DME, Gary King, commented: "The industry, with whom we consulted widely, has contributed hugely to the creation of the contracts that we are now trading. Our members have committed to the Dubai Mercantile Exchange in significant numbers prior to today's launch.
"The DME's customers know that the contract's deliverability provides true price convergence between the cash and physical markets. This is especially advantageous in Asia, which imports more than two thirds of its crude oil from the Middle East and has long sought greater price transparency and better risk management tools."
The DME will close its markets at 1:15 am Dubai time on Saturday morning.