Firm Agrees with U.S. Firms to Use New UAE-based Oil Benchmark for Sales to Asia
(Reuters) – Intercontinental Exchange Inc ICE.N has signed agreements with oil companies Chevron Corp CVX.N and Occidental Petroleum Corp OXY.N, and leading merchant Trafigura AG to use the upcoming Murban crude futures contract as a pricing benchmark for U.S. sales to Asia, the president of ICE Futures Europe said on Tuesday.
The move underscores the growing importance of the United States in the global crude export market, even though it only started exporting crude four years ago after ending a 40-year-ban. It now ships more than 3 million barrels per day worldwide, including to large Asian customers China, South Korea and Taiwan.
The new contract will give Asian buyers of crude an easier way to hedge against physical purchases of U.S. crude oil, and could allow them to avoid using the London-based benchmark Brent crude LCOc1 for hedging.
“We’re starting to see interest from not just Middle East crude exporters to Asia but we’re seeing other firms, particularly those exporting light sweet crude pay attention,” Stuart Williams, president of ICE Futures Europe, told the ADIPEC conference on Tuesday.
ICE said it planned to launch ICE Futures Abu Dhabi and trading in Murban crude oil futures contracts on March 29, 2021. Murban futures will be a physically delivered contract with delivery at Fujairah in the United Arab Emirates on a free on board basis, complemented by a range of cash settled derivatives, the statement said.
Occidental, Chevron and Trafigura are among the largest U.S. exporters of U.S. crude. The United States produces roughly 11 million bpd, much of it light, sweet crude originating in Texas.
The new contract will create an alternative benchmark to the most commonly used Middle East standard, the Dubai/Oman benchmarks operated by S&P Global Platts and the Dubai Mercantile Exchange.
The Murban contract, by contrast, is a light crude, and will likely be a more heavily traded one, said Sandy Fielden, analyst at Morningstar.
“The fact that ICE has attracted interest from traders already suggests they are buying in and their customers are ready to participate,” said Fielden.
Fred Forthuber, president Oxy Energy Services, one of the largest exporters of U.S. crude to Asia, said: “Murban moving to forward-looking pricing, as a futures contract, is another great step in the evolution of the oil market.”..reports Reuters.
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