The Oman Oil Futures contract traded on Dubai Mercantile Exchange (DME) is yet to become a benchmark like the Brent or West Texas Intermediate despite the reasonble growth in contracts traded from 1.27 mn barrels a day in 2007-08 to 2.9 Mbpd in 2010.
An optimist assessment of the DME s life is that its survival and its growth make it a relative success story compared to many of its ambitious peers. Several futures contracts introduced around the same time of the Oman contract have since died, no doubt impacted by low crude prices when recession took hold of global economies, but also over mistrust of derivatives in energy markets that many players find too speculative, according to Andres Cala in an article in Energy Tribune
The DME is having an ambitious plan to raise liquidity to 10 Mbpd from the present 2.9 Mbpd but it has been unable to attract big players, namely Middle Eastern national oil companies and big Asian refiners. Average liquidity still represents under a quarter of the 12 Mbpd of Middle Eastern crude shipped to Asia, and unless Saudi Arabia, Kuwait or Iran decide to join, that is unlikely to change, Energy Tribune reported.
Saudi Arabia and other leading energy producing nations prefer termed and conditioned long term contracts in crude oil. Saudi Arabia, for eg., prices its oil one month in advance applying a differential to each crude grade depending on the destination. It uses Intercontinental Exchange Brent for Europe, Argus Sour Crude Index for the US, and a Dubai price assessment published by Platts for Asia. Other Gulf countries link their prices to Saudi Aramco. With oil majors, Saudi Arabia still not believing in 'paper' contracts, it is still a far way off for the Oman Futures to become a benchmark, according to analysts.DME launched the Oman Futures contract in June 2007, backed by the New York Mercantile Exchange, with the attractive option of offering physical delivery.
DME's oil contract is perfect on transparency and technical issues but is not quite attractive to investors. The vast majority of exchanges fail because they come up with contracts that they think are very clever and good on paper, but successful markers is what markets demand,Energy Tribune quoting David Kirsch, Director, PFC Energy Market Intelligence said.
An optimist assessment of the DME s life is that its survival and its growth make it a relative success story compared to many of its ambitious peers. Several futures contracts introduced around the same time of the Oman contract have since died, no doubt impacted by low crude prices when recession took hold of global economies, but also over mistrust of derivatives in energy markets that many players find too speculative, according to Andres Cala in an article in Energy Tribune
The DME is having an ambitious plan to raise liquidity to 10 Mbpd from the present 2.9 Mbpd but it has been unable to attract big players, namely Middle Eastern national oil companies and big Asian refiners. Average liquidity still represents under a quarter of the 12 Mbpd of Middle Eastern crude shipped to Asia, and unless Saudi Arabia, Kuwait or Iran decide to join, that is unlikely to change, Energy Tribune reported.
Saudi Arabia and other leading energy producing nations prefer termed and conditioned long term contracts in crude oil. Saudi Arabia, for eg., prices its oil one month in advance applying a differential to each crude grade depending on the destination. It uses Intercontinental Exchange Brent for Europe, Argus Sour Crude Index for the US, and a Dubai price assessment published by Platts for Asia. Other Gulf countries link their prices to Saudi Aramco. With oil majors, Saudi Arabia still not believing in 'paper' contracts, it is still a far way off for the Oman Futures to become a benchmark, according to analysts.DME launched the Oman Futures contract in June 2007, backed by the New York Mercantile Exchange, with the attractive option of offering physical delivery.
DME's oil contract is perfect on transparency and technical issues but is not quite attractive to investors. The vast majority of exchanges fail because they come up with contracts that they think are very clever and good on paper, but successful markers is what markets demand,Energy Tribune quoting David Kirsch, Director, PFC Energy Market Intelligence said.
