DME Oman crude futures volumes up on 1st day

01 June 2007 16:16  [Source: ICIS news]

SINGAPORE (ICIS news)--The Dubai Mercantile Exchange (DME) enjoyed modest levels of success with trading volumes rising steadily through the day after it launched its landmark physically deliverable Oman crude oil futures contract on Friday in Asia.

The August DME Oman futures contract settled on Friday at 08:30 GMT for the first time at $64.09/bbl.

Trading in the DME Oman futures began at 22:00 GMT on Thursday, and by late afternoon in Asia on Friday volumes stood at around 468 lots done for August and September contract months.

By 14:36 GMT on Friday, the volume traded had risen to 1,625 lots.

ICE Futures, which launched its rival ICE Middle East sour crude oil futures contract on 21 May, enjoyed a somewhat higher volume of trade on Friday reaching 2,727 lots by 14:36 GMT.

“This is an historic and long-awaited day and marks the culmination of almost three years of intensive planning and preparation," said DME Chairman Ahmad Sharaf .

"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,” he added.

The progress of the DME contract is being closely monitored in the crude market due to its growing importance in the pricing of physical cargoes moving into Asia.

Earlier this week Dubai announced that it would adopt forward pricing of its crude oil based on the daily settlement price of the Oman contract. Oman made a similar announcement late last year.

Previously both Dubai and Oman had priced their crude with reference to daily valuations from the Platts reporting service.

From June Oman will set its official price based on the arithmetic average of the daily settlement of the contract over each calendar month. The average set in June will therefore price Oman’s August cargoes.

The physical deliverability of the DME Oman crude oil futures contract, is seen to give it an advantage over ICE Middle East sour crude oil futures contract. The ICE contract is cash-settled against the Platts Dubai physical price assessment.

“The DME’s customers know that the contract’s deliverability provides true price convergence between the cash and physical markets," said DME chief executive Gary King. 

"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,” he added. 

Both Dubai and Oman are stakeholders in the DME, through Dubai’s government linked Tatweer organisation and Oman’s Oman Investment Fund (OIF).

On Tuesday, OIF concluded a deal to take a 30% interest in the exchange. The other DME partner is the New York Mercantile Exchange (NYMEX), which will also provide clearing and settlement services to the exchange.

By: James Dennis
+65 6780 4359

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