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DGCX plans two energy futures

The Dubai Gold and Commodities Exchange (DGCX) plans to launch two energy products, possibly futures contracts, to help boost Dubai's position as the Gulf's energy trading hub, industry sources and brokers said on Monday.

  • Reuters
  • Published: 00:21 May 20, 2008
  • Gulf News

Dubai: The Dubai Gold and Commodities Exchange (DGCX) plans to launch two energy products, possibly futures contracts, to help boost Dubai's position as the Gulf's energy trading hub, industry sources and brokers said on Monday.

"The exchange has been working on a few energy futures contracts, and they will announce on Tuesday the launch dates for of them," one source said.

"They want to create a transparent pricing benchmark for energy products, but it will take them both time and huge liquidity to succeed," the source said.

Efforts by DGCX to launch a fuel oil contract in October 2006 floundered. The Dubai Multi Commodities Centre (DMCC), which owns a majority stake in the bourse, said in November it was planning to launch a liquefied natural gas futures contract on the exchange platform soon, as surging energy prices increase demand for hedging tools.

The sources and member brokers did not reveal the products, but said they be could LNG, crude, gas oil or gasoline, which is the only refined product in which the Middle East as a region is net short, with Iran being one of the world's largest importers.

DGCX is planning to launch four plastics contracts later this year as high energy prices encourage designers to make buildings, cars and aircraft as energy-efficient as possible, increasing demand for light materials such as plastics.

The exchange is based in the commercial hub of the world's top oil-exporting region, which according to the Gulf Petrochemicals and Chemicals Association has half the world's petrochemical projects.

Tough task

"Their planned energy portfolio, whether crude or refined products, will have to be physically deliverable, which is a tough task," a member broker of DGCX said.

"They need more than just the right location for their energy products to work," he added.

The Dubai Mercantile Exchange (DME) will launch two cash-settled crude futures contracts next month, hoping to attract more financial players who have so far stayed away from the first Oman futures, physically-delivered, contract.

The new contracts for Brent and Oman crude will start on June 2, a year after the DME launched its first Oman crude futures contract, the first such sour crude contract to remain actively traded a year after its launch.

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