Singapore: The Dubai Mercantile Exchange (DME), set to start Oman crude oil futures trading before the end of this year, will also trade Brent-Oman spreads and WTI-Oman spread contracts, officials said yesterday.
The futures exchange also unveiled details of its Oman futures contract that will be trading on an almost 24-hour basis, and is largely modelled on the New York Mercantile Exchange Exchange (Nymex).
"From day one, Brent-Oman and a WTI-Oman spread contracts will be available, too," Jerald David, vice-president marketing for DME said at the first of several seminars to be held ahead of the launch of the exchange.
The DME a joint venture between the Nymex, the world's biggest commodities market, and Dubai Holding plans to launch the first oil futures contract ever traded in the Middle East during the fourth quarter of this year.
Spread contracts will provide a link between the new Oman contract and Nymex's existing contracts WTI and Brent though Nymex Brent is little traded.
This could help underpin the new futures contract, after previous attempts to create a contract for sour crude have failed. Nymex, the largest energy exchange worldwide, cleared more than 150 million futures contracts in 2005.
The spread contracts may eventually replace the over-the-counter Brent/ Dubai Exchange of Futures for Swaps (EFS), through which Dubai prices, one of the two benchmarks for Middle East crude, are largely determined.
Asian oil traders, refiners and producers have long lamented the lack of a local robust, liquid futures contract they can use for trading and hedging, forcing them to use more opaque over-the-counter derivatives such as swaps, or take greater basis risk by using light, sweet contracts in London or New York.
The Oman contract if successful would create the basis for a sour crude benchmark, facilitating price discovery for some 12 million barrels per day (bpd) of Middle East crude that head to Asia.
"The lack of a transparent sour crude benchmark hinders Middle East oil price discovery," said Gary King, DME's CEO.
The contract, traded in 1,000-barrel lots, will have physical delivery from 200,000 barrels onwards.
Oil output falls 3%
Independent producer Oman's oil output fell 3 per cent to 750,800 barrels per day (bpd) in the first half of the year from the same period in 2005, official figures show.
Total crude oil and condensate production dropped 3 per cent to 135.9 million barrels in the first six months of 2006, according to Economy Ministry figures. Crude oil output was down 4.3 per cent at 124.06 million barrels from 129.58 barrels.
Total crude oil exports in the first half of the year were 120.96 million barrels, down 6.7 per cent from 129.59 million barrels in the same period in 2005.