DME pioneers Middle East crude benchmark

Dubai: Now in its third year of operations, the Dubai Mercantile Exchange (DME) has established itself firmly as the premier energy-focused commodities exchange in the Middle East.

It provides price transparency and market liquidity for crude oil from the world's foremost oil producing and exporting region.

Launched in June 2007, the DME's goal from the very beginning was to bring fair and transparent price discovery and efficient risk management to the East of Suez markets, the world's fastest growing commodities market and the largest crude oil supply and demand corridor in the world.

The DME benefits from the backing of prominent stakeholders. Established in June 2005, as a joint venture between Tatweer (a member of Dubai Holding) and the New York Mercantile Exchange (NYMEX), a member of CME Group, the Oman Investment Fund (OIF), investment arm of the Sultanate of Oman, became a core shareholder in October 2006.

A resounding vote of confidence was received from the market in 2008 when the DME concluded an approximate 20 per cent minority-stake placement with a consortium of strategic shareholders including Concord Energy, Goldman Sachs, JP Morgan, Morgan Stanley, Shell and Vitol.

Flagship contract

The DME lists the Oman Crude Oil Futures Contract (DME Oman) as its flagship contract, serving as the fairest and most transparent crude oil benchmark for the East of Suez region.

Following the signing of an historic Memorandum of Understanding between the DME and the Sultanate of Oman in 2006, two key moves by the Sultanate helped ensure success:

• From launch, the Ministry of Gas (MOG) adopted DME Daily Settlements as the basis for their Official Selling Price and also initiated forward pricing of Oman's crude oil, abandoning the former retroactive methodology.

• The Oman Investment Fund, a subsidiary of the Ministry of Finance, announced its intention to purchase a 30 per cent stake in the DME.

On June 23, 2009 the Dubai Department of Petroleum Affairs announced that it would publish an official monthly selling price for the Emirate's crude oil based on a differential set directly on the settlement price of the DME Oman Crude Oil Futures Contract.

The DME is regulated by the Dubai Financial Services Authority. The DME's achievements were celebrated by the global industry in April 2008 when it won the "Exchange Newcomer of the Year" 2008 Award from FOW, a leading global derivatives magazine.

DME Chairman Ahmad Sharaf said: "DME's success to date, achieved at one of the world's major financial hubs — the DIFC, is a clear testament to the robust fundamentals of the Exchange, trust by industry partners, and broad market recognition of the DME Oman as the most fair and transparent crude oil benchmark in the East of Suez region."

The author is the CEO of Dubai Mercantile Exchange