Murban Futures Aim To Solidify UAE’s Position As Global Oil Power

DUBAI, United Arab Emirates – Abu Dhabi’s decision to launch its Murban oil futures this month will strengthen its position as a global oil powerhouse, but adoption issues remain, according to leading experts and analysts.

Abu Dhabi’s national oil company has confirmed that contract negotiations will begin on March 29, marking a major shift in the way the oil-rich emirate prices its crude exports. Murban is Abu Dhabi’s flagship crude quality and accounts for more than half of the UAE’s total production.

“What this shows is that Abu Dhabi and the United Arab Emirates continue to consolidate their role as major producers in the future,” Dan Yergin, vice president of IHS-Markit, told CNBC on Thursday.

“It continues to add capacity and sees itself as a global economic center, and he wants that reflected in the flow of crude,” Yergin told CNBC’s “Capital Connection”.

After its launch was delayed by nearly a year due to regulatory hurdles, Murban’s futures contract, traded on the new ICE Futures Abu Dhabi Exchange, will allow the market to determine the price of Abu Dhabi oil and replace the less transparent retroactive pricing methods that have been used in the past.

“The announcement further reinforces ADNOC’s shift towards benchmarking Murban as a price fixer for the Middle Eastern crude market, particularly for light acid barrels, a plan that has been underway for several years,” said Amrita Sen, chief oil analyst at Energy Aspects.

However, experts are divided on whether the deal will significantly elevate the note’s status among rivals or increase its share in increasingly competitive Asian markets, where 90% of Murban is sold. Abu Dhabi also believes the futures contract can be used as a regional benchmark to price other Gulf crudes, but concerns remain over adoption.

“Murban has the potential to be a significant development in the evolution of crude trade in the Middle East, but we’ll have to see how easily the market embraces the contract,” Herman Wang, OPEC news editor and the Middle East at S&P Global Platts, told CNBC.

Saudi Arabia, the largest producer in the Gulf, currently uses a method linked to Omani crude futures contracts traded on the Dubai Mercantile Exchange. Most other producers base their monthly crude oil prices on Dubai and Oman crude oil price assessments made by S&P Global Platts.

“In a market that tends to hold familiar benchmarks, even if they are imperfect, for a long time, it is difficult to see who, beyond ADNOC, could be the first to explore this new pricing option,” Azlin Ahmad, senior crude oil editor at Argus Media, said in a recent research note.

“All of this suggests that it may take time for Murban to gain a foothold in the price of Middle Eastern Gulf crude exports, with many companies likely to take a wait-and-see stance.”

While broadly optimistic, analysts say it will take some time for Murban’s futures to gain popularity and credibility, but Stuart Williams, president of ICE Futures Europe, is more confident about his prospects for the future.

At the heart of the adoption strategy is “to plug Murban into a global distribution network and allow all eyes that are on Brent to have eyes on Murban as well,” he told reporters at the meeting. ‘an ADNOC press conference on Wednesday.

“We think of Murban as an instrument that can be used by traders all over the world, and we plan to have worldwide participation from the start,” he said.

Nine companies have already registered as shareholders of the new futures exchange, including BP, Shell, Total and Vitol. Two of China’s largest crude importers, including China’s largest refiner – Rongsheng – and state-trading company Unipec, are also looking to use the contract.

The UAE is the third largest producer in the OPEC group. While trading in the Murban contracts will not impact the UAE’s OPEC strategy at face value, experts warn the need for increased liquidity to support the contract may not match future futures production ceilings imposed by the organization.

“It’s not very clear how ADNOC reconciles this with country quotas. Strengthening liquidity requires higher volumetric production,” a UAE-based banker told CNBC, speaking anonymously due to the professional restrictions.

“OPEC quotas are on production, not on market supply, and therefore our local and international storage can easily cope with it … if that happens in the future,” Khaled said. Salmeen, Executive Director of ADNOC’s Industry, Marketing and Downstream Business Directorate. the ADNOC press conference on Wednesday.

“We are committed to the current OPEC + agreement,” said Salmeen. “We have significant reserves in our storage… we believe that such storage availability can cope with the coming months of any of these contracts to ensure that the supply is uninterrupted.”