Markets

Murban crude futures start trading at new ICE, Abu Dhabi exchange

Share
Key Points
  • The contract was priced at $63.93 per barrel as of 0100 GMT with 2,132 lots traded, ICE said on Twitter. Each lot is 1,000 barrels.
  • Abu Dhabi-based IFAD is backed by the Intercontinental Exchange Inc, Abu Dhabi National Oil Co (ADNOC) and partners including international oil majors.
A view of a street in Abu Dhabi, United Arab Emirates
Valery Sharifulin | TASS | Getty Images

The Murban crude futures contract launched on Monday, the key contract of the new ICE Futures Abu Dhabi (IFAD) oil exchange, offering a potential rival benchmark for trading Middle East crude.

The contract was priced at $63.93 per barrel as of 0100 GMT with 2,132 lots traded, ICE said on Twitter. Each lot is 1,000 barrels.

Abu Dhabi-based IFAD is backed by the Intercontinental Exchange Inc, Abu Dhabi National Oil Co (ADNOC) and partners including international oil majors.

"This is a historic moment for us," Khaled Salmeen, ADNOC's executive director for downstream industry, told CNBC's Hadley Gamble.

"It's been a long journey. And our ambition here is to make sure that Murban is positioned as a freely traded commodity globally. And as such, you know, it allows both customers to capture value through being able to hedge and manage their pricing risks, but at the same time for us to be able to maximize value."

The Murban contract, which prices the flagship Abu Dhabi grade that accounts for more than half of ADNOC's production, will offer an alternative benchmark to Dubai, operated by S&P Global Platts, and Oman crude futures traded on the Dubai Mercantile Exchange (DME).

The contract will enable traders to hedge Middle East crude and refining margins against the grade. It would also allow traders to compare the values of competing supplies from Russia, Europe and the United States with similar quality to Murban using a range of cash-settled derivatives against Brent, West Texas Intermediate.

The contract prices the crude two months ahead with the first expiry month set for June. It is a physically delivered contract with delivery at Fujairah in the United Arab Emirates on a free-on-board (FOB) basis.

'We've seen an evolution'

Other partners in IFAD include BP, Total, Inpex, Vitol, Shell, PetroChina, South Korea's GS Caltex, Japan's Eneos Holdings and Thailand's PTT Plc. IFAD's launch was delayed by nearly a year due to the COVID-19 pandemic.

Total CEO Patrick Pouyanne told CNBC at the launch that volumes with the new benchmark "might very quickly overpass these existing benchmarks."

"We've seen an evolution — Aramco is all listed, you know, you trust the markets or going from a traditional economy and we've seen that governments in the region are all going towards free markets which I think is good for global economy and for the future of the region."

ADNOC will set the monthly official selling price (OSP) for Murban based on the futures contract and price its other three grades, Das, Umm Lulu and Upper Zakum, at differentials to the Murban contract.

Murban is considered as a light sweet crude and has an API gravity of 39.9 degrees and a sulphur content of 0.78%, with output of about 2 million barrels per day (bpd), according to ICE. API gravity measures a crude's density.

The UAE, the third biggest oil producer in the Organization of the Petroleum Exporting Countries (OPEC) behind Saudi Arabia and Iraq, pumps about 2.5 million to 3 million bpd, mostly produced by ADNOC.

—CNBC's Matt Clinch and Emma Graham contributed to this article.