Abu Dhabi National Oil Company plans to float its flagship Murban crude grade on a futures exchange early next year, its group chief executive said.
"In the first quarter of next year of 2021, we are very much excited, and in fact looking forward to the launch of ICE Futures Abu Dhabi. In our view, this is a major development for oil markets,” Dr Sultan Al Jaber told an Energy Intelligence panel.
"IFAD will be the world's first trading platform to include futures contracts based in Abu Dhabi and it's based on Abu Dhabi's unique grade of the Murban crude, which as you know, is really and truly fast becoming the benchmark grade across Asia.”
Intercontinental Exchange, which operates global exchanges, said on Monday it will float Murban crude futures in the first quarter of 2021.
The ICE Futures Abu Dhabi will begin trading next year, subject to the completion of regulatory approvals.
A more specific date for the launch of trading will be announced in due course, ICE said.
Murban is Abu Dhabi's flagship crude grade, which flows at approximately 1.7 million barrels per day. The company currently uses a retroactive pricing mechanism for its crude.
The new Murban Crude forward pricing mechanism will use a market-driven futures contract as its price marker, enabling customers and the market to better price, trade, and manage their crude requirements.
"ICE Murban Futures will be a physically delivered contract with delivery at Fujairah in the UAE on a free on board (FOB) basis,” the exchange operator said.
The futures will be complemented with a range of cash settled derivatives, which will be launched on the first day of trading.
Contracts traded at the Abu Dhabi exchange will be cleared at ICE Clear Europe alongside global benchmarks such as Brent, WTI, ICE Platts Dubai and ICE Low Sulphur Gasoil.
Last year, oil majors including BP and Total, trading house Vitol and Asian energy companies partnered with Adnoc to set up the international futures exchange for Murban.
Intercontinental Exchange Abu Dhabi will be based at the Abu Dhabi Global Market, the capital’s international financial centre. Companies that signed the partnership include Thailand’s PTT, Japan’s JXTG and Inpex, BP, France’s Total, South Korea’s GS Caltex, PetroChina, Anglo-Dutch major Shell and Vitol.
The Supreme Petroleum Council also lifted restrictions on destinations for the sale of Murban. Brent is the most widely-used benchmark for crude and is based on production from the North Sea, which is currently in decline. Around two-thirds of all crude contracts globally reference to Brent. In the Middle East, Saudi Arabia – the world’s largest oil exporter – uses the Oman crude price quoted on the Dubai Mercantile Exchange.
Dr Al Jaber also remained optimistic over the long-term demand for oil and cited Opec's recent estimate for overall demand to reach 109m bpd over the next 20 to 25 years.
He added that the UAE was "keeping a close eye" on the potential impact of new Covid-19 restrictions that were enforced following a second wave of infections.
The UAE, which is part of the Opec+ alliance to cut production, remained "100 per cent compliant" to output curbs agreed by the alliance, he said.
The group, led by Saudi Arabia and Russia, is cutting back 7.7m bpd from the markets and will convene their technical and monitoring committee meetings on Thursday and on October 19, respectively.
