The key contract of the new ICE Futures Abu Dhabi (IFAD) oil exchange, the Murban crude futures has started trading under the symbol “ADM”, offering a potential rival benchmark for trading Middle East crude.
Abu Dhabi-based IFAD is backed by the Intercontinental Exchange (ICE), Abu Dhabi National Oil Company (ADNOC) and partners including international oil majors. The exchange is a historic first for the Middle East, as the UAE’s flagship crude grade Murban, produced from onshore wells by ADNOC, is used to price and hedge oil being traded into Asian markets.
The Murban contract will offer an alternative benchmark to Dubai, operated by S&P Global Platts, and Oman crude futures traded on the Dubai Mercantile Exchange (DME).
The contract will allow traders to hedge Middle East crude and refining margins against the grade. It will further enable traders to compare the values of competing supplies from Russia, Europe and the US with similar quality to Murban using a range of cash-settled derivatives against Brent, West Texas Intermediate.
The Murban contract prices the crude two months before the first expiry month set for June and it is a physically distributed contract with delivery at Fujairah in the UAE on a free-on-board (FOB) basis.
Other leading partners in IFAD include BP, Total, Inpex, Vitol, Shell, PetroChina, South Korea’s GS Caltex, Japan’s Eneos Holdings and Thailand’s PTT Plc.
ADNOC will set the monthly official selling price (OSP) for Murban based on the futures contract and price its other three grades Das, Umm Lulu and Upper Zakum, at differentials to the Murban contract.
According to ICE, Murban is considered a light sweet crude and has an API gravity (measures a crude’s density) of 39.9 degrees and sulfur content of 0.78 percent, with an output of about 2 million barrels per day (bpd).
The Middle East accounts for the largest share of global production at 31.9 percent, according to BP Statistical Review of World Energy 2020. The UAE is the third-biggest oil producer in the Organization of the Petroleum Exporting Countries (OPEC) behind Saudi Arabia and Iraq, draws about 2.5 million to 3 million bpd, mostly produced by ADNOC.