A focus on the crude oil trading community and on end users in Asia will be the key to the next phase of growth at the Dubai Mercantile Exchange, said the bourse's new chief executive.
Dubai Mercantile Exchange to focus on 'east of Suez' for growth
Increasing the amount of crude priced off the exchange could convince the Arabian Gulf's national oil companies (NOCs) to adopt the DME as a benchmark for their trades, turning the exchange into a benchmark for Arabian oil traded into Asia.
"The next boost we're going to see in the DME is going to be from our existing clients," said Christopher Fix, the chief executive.
The exchange has been successful in growing the volumes of crude traded to about 3.5 million barrels per day (bpd) since starting out five years ago.
It got a boost this year when the Chicago Mercantile Exchange (CME), the world's largest commodity bourse, increased its holding in the DME, becoming the majority shareholder.
The Chicago bourse will help the Dubai exchange to develop its capacities, while efforts to attract the traders and end buyers will have to be stepped up, said Mr Fix.
"We need to focus on what we can do to better our exchange first. And then, as we get momentum, build those contracts and bring in those trading communities, the numbers will go up.
And as the numbers go up, we will become more interesting to different parts of the market."
More than 80 per cent of the oil exported out of the Gulf is traded to Asia, and many in the industry believe that Brent crude, produced in the North Sea, is not an accurate benchmark for the east of Suez trade.
The DME is keen to promote itself as an alternative benchmark, and its prices are based on Oman's 900,000 bpd production.
"The market is in need of a better pricing mechanism for east of Suez trade," said Mr Fix.
Before starting at the exchange in August, the new chief executive spent 20 years in commodity trading with the French bank BNP Paribas, most recently in the Asian energy hub of Singapore.
He is optimistic that more market players will start dealing the exchange's future contracts, and that the DME will eventually be able to supplant the energy information service Platts as the foremost trading platform for Gulf crude.
This will be achieved when the NOCs in the Gulf adopt the DME as the benchmark for their crude sales.
The Dubai exchange is also mulling additional futures contracts, with fuel oil used to power ships one of the products under consideration.