A revolution in oil sales in the Middle East … and that’s why!

Fujairah’s land port sits between the Gulf of Oman and a rocky mountain range, and it’s not a clear base for an attempt to revolutionize oil markets in the Middle East.

But on Monday, when Abu Dhabi starts selling oil futures and then shipping barrels out of Fujairah, it will mark a powerful change for the emirate. He hopes to change the way nearly a fifth of the world’s crude oil is priced.

The UAE pumps nearly 20 million barrels of oil a day and Abu Dhabi wants Murban crude futures to become the main indicator of oil in the region, according to Bloomberg, and seen by Al Arabiya.net.

Major Gulf producers – notably Saudi Arabia, Iraq and the United Arab Emirates – have priced their barrels on standardized grades from other regions. They mainly sold their crude directly to refineries or to international companies that had stakes in their fields. Basically, they have prevented these customers from reselling oil and taking advantage of the arbitrage opportunities that exist in the global energy markets.

Abu Dhabi, in turn, is now removing those restrictions in a bid to open up its oil to financial traders and oil traders.

According to the new plan, once the crude is sold on the stock exchange, Murban will be sent via a pipeline to Fujairah, where Abu Dhabi’s desert fields are physically connected to global markets.

Vandana Hari, founder of Singapore-based oil consultancy Vanda Insights, said: “If this succeeds – and I think the opportunities are good – Murban futures could be a pivotal moment for crude oil pricing in the Middle. -East.” He said that if much of Middle Eastern crude was freely traded in the spot market, it could push other regional producers to follow Abu Dhabi’s approach.

Storage

To support its projects, the Abu Dhabi National Oil Company (ADNOC) is spending around $ 900 million to build warehouses for 40 million barrels in caves under the mountains of Fujairah.

For his part, Khaled Salmeen, ADNOC’s Marketing and Trade Manager, said this month that this, along with the ADNOC tanks already in the port, would ensure that there is plenty of Murban crude available to handle any future disruption of supply.

ADNOC can pump around 2 million barrels per day from Murban and is committed to supplying the exchange with half that volume over the next year – in line with or more than the supply of current major oil standards such as than Brent and West Texas Intermediate.

A broader ambition

Chris Beck, director of Vitol Group, the world’s largest independent oil trader, said liquidity “counts for the whole equation”.

The futures platform will be operated by the Intercontinental Exchange in Atlanta, while the platform will be called ICE Future Abu Dhabi, which agreed last week to include Goldman Sachs, Citigroup and 22 banks and other brokers. as members of the exchange.

ADNOC’s plan underscores the UAE’s broader ambition to invest its hydrocarbon resources more quickly in the event that demand for oil begins to decline with the global shift to environmentally friendly energy. The country aims to increase its production capacity from around 4 million barrels per day currently to 5 million by 2030, making it OPEC’s largest producer after Saudi Arabia.