Murban futures aims to consolidate the UAE’s position as a global oil powerhouse

DUBAI, United Arab Emirates – Abu Dhabi’s move to launch its Murban oil revenue contract this month will strengthen its position as a global oil power, but there are still challenges to adoption, according to a key experts and analysts.

Abu Dhabi National Oil Company has confirmed that trading on the contract will start on March 29, marking a major change in how the oil-rich emirate will price its crude exports. Murban is Abu Dhabi’s main raw material and accounts for more than half of UAE’s total output.

“What it shows is that Abu Dhabi and the UAE continue to consolidate its role as a leading producer in the future,” Dan Yergin, IHS-Markit vice-chairman, told CNBC on Thursday.

“It continues to build capacity and sees itself as a global economic hub, and it wants that to be seen in the raw stream,” Yergin told CNBC ‘s Capital Link. “

After its launch was delayed nearly a year due to regulatory hurdles, the futures deal for Murban, which trades on the new ICE Futures Abu Dhabi Exchange, will allow Abu Dhabi oil price to fall. test and use the less obvious reactive pricing methods used years ago.

“The news confirms ADNOC’s move to benchmark Murban as a price fixer for the Middle East crude market, particularly for lightly sour barrels, a plan that has been on the move for several years, “said Amrita Sen, chief oil analyst at Energy Aspects.

However, experts are divided on whether the deal will significantly raise the status quo among its competitors or expand its share in the increasingly competitive Asian markets, where 90 % of Murban sold. Abu Dhabi also believes that the futures contract could be used as a regional criterion to deduct other prices from the Gulf, but there are still concerns about adoption.

“Murban has the potential to be a major development in the evolution of crude trade in the Middle East, but we need to see how easily the market accepts the deal,” said Herman Wang, managing editor of news OPEC and the Middle East at S&P Global Platts, CNBC reported.

Saudi Arabia, the Gulf’s largest producer, is currently using a method linked to Omani’s crude futures traded on the Dubai Trade Expo. Most other producers base their crude price each month on Dubai and Oman crude price estimates operated by S&P Global Platts.

“In a market that tends to hold on to familiar criteria, even if they are flawed, for a long time, it is difficult to see who, beyond ADNOC, could be the first to explore this new pricing option, “Azlin Ahmad, crude oil editor at Argus Media, said in a recent research note.

“All of this suggests that it may take time for Murban to gain a foothold in Mideast Gulf’s crude export prices, with many companies likely to wait and see a stand.”

While generally optimistic, analysts say it will take some time for Murban’s futures to catch on and believe, but Stuart Williams, president of ICE Futures Europe, is more optimistic about the prospects. his future.

At the heart of the adoption strategy is “plugging Murban into a global distribution network and making it simple for Brent’s eyes to have an eye on Murban as well,” he told reporters at co ADNOC press conference Wednesday.

“We think of Murban as an instrument that can be used by traders across the globe, and we expect to have worldwide engagement from an early stage,” he said.

Nine companies have signed up as shareholders in the new futures exchange, including BP, Shell, Total and Vitol. Two of China’s largest crude imports, including China’s largest refinery – Rongsheng – and state-owned trading company Unipec, are also looking to use of the contract.

The UAE is the third largest producer in the OPEC group. While Murban’s contract trading will not affect the UAE’s OPEC strategy at face value, experts warn that more liquidity will not be needed to support the deal with any future rations on production that the group has. ordering.

“The manner in which ADNOC squares this with rural quotas is not clear enough. Bolstering liquidity requires higher volume production,” said one UAE-based banker, speaking anonymously due to professional constraints, told CNBC.

“OPEC quotas are about production, not market supply, so our local and international storage can easily handle that… if it happens in the future,” said Khaled Salmeen, group executive director- Business, Marketing and Commerce DownN ADNOC ADNOC news conference Wednesday.

“We are committed to a standard OPEC + agreement,” Salmeen said. “We have huge resources in our storage … we believe that such storage can handle the coming months of any of these contracts to ensure uninterrupted supply. ”