Abu Dhabi’s Supreme Petroleum Council (SPC) has approved a decision by Abu Dhabi National Oil Company (Adnoc) to launch its Murban onshore crude oil grade as a futures contract on the oil commodities exchange.
The launch of a new forward pricing mechanism for Adnoc’s Murban crude grade supports the state energy giant’s drive to strengthen its marketing, supply and trading capabilities, and enhances the attractiveness of the Murban grade, Adnoc said in a statement on 4 November.
It was earlier reported that Adnoc was considering launching a regional oil benchmark based on its Murban crude grade next year, and had chosen the US-based Intercontinental Exchange (ICE) for that purpose.
Adnoc says it will engage with its customers and other stakeholders over the coming months regarding the implementation of its new Murban crude forward pricing mechanism, which involves moving from a retroactive official selling price (OSP) to market-driven, transparent, forward pricing.
The company expects to implement its new Murban crude forward pricing mechanism sometime during the second and third quarters of 2020.
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.
The futures contract will be traded on an independent and regulated exchange and is expected to demonstrate a highly liquid forward price curve, given the market appetite for Middle East crude.
The SPC approval also included the lifting of destination restrictions on Adnoc sales of Murban crude.
“Murban is recognised the world over for its intrinsic chemical qualities, consistent and stable production volumes, large number of international buyers, and numerous long-term concession and production partners. These landmark changes, [which] the SPC has approved, will make Murban an even more attractive crude to the global market,” said Adnoc Group CEO Sultan al-Jaber.
It was reported in July that Adnoc was in talks over the Murban benchmark plan with a number of exchanges, including ICE and the Chicago Mercantile Exchange (CME), as part of the company’s plans to overhaul its trading operations.
The Murban contract will create an alternative benchmark to the most commonly used Middle East standard, the Dubai/Oman benchmark operated by the Dubai Mercantile Exchange and traded on CME’s electronic platform.
The UAE, the third-largest Opec oil producer behind Saudi Arabia and Iraq, pumps about 3 million barrels a day (b/d), produced mostly by Adnoc.
Murban light crude grade production stands at about 1.6 million to 1.7 million b/d, and is exported from the port of Fujairah.
For many years, the UAE has traditionally sold oil directly to end-users, mainly in Asia, based on a retroactive pricing system rather than the forward pricing used by Saudi Arabia, Kuwait and Iraq.
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