The New York Mercantile Exchange (NMX) is expanding to Dubai as the oil market turns to sour crude to quench some of the worldwide demand. To find out whether traders will pump money into the new Dubai oil contract – and to discuss the exchanges themselves - the guys brought NYMEX CEO James Newsome on set.
Newsome says the industry has been begging for this crude contract for 20 years. It hasn’t been until now that there is enough “legal and regulatory certainty” in the Middle East to set up the physical requirements for the contract, he says.
Around 60% of the crude oil that flows out of the Middle East is heavy sour crude, which goes mainly to China and India. Using sweet crude oil as a hedge has been imperfect for these purposes, Newsome says, which is why the sour crude contract will create a “perfect hedging opportunity.”