BP, Total, Shell, Vitol take stakes in Abu Dhabi oil bourse

BP, Royal Dutch Shell, Total SA and Vitol Group are among partners in a new exchange to trade Abu Dhabi’s flagship oil grade in what could become a new price benchmark for a fifth of the world’s crude.

Intercontinental Exchange chairman Jeffrey Sprecher confirmed the partnerships, speaking on Monday to reporters in Abu Dhabi. Other partners in the exchange are Petrochina Co, Inpex Corp. and JXTG Holdings of Japan, PTT of Thailand, and South Korea-based GS Caltex Corp, he said.

Although oil producers across the Gulf pump about a fifth of the world’s oil, they have never had a region-wide, exchange-traded crude benchmark. ADNOC wants the Murban futures contract to become a benchmark for crude from the Middle East, the world’s biggest oil exporting region.

Abu Dhabi National Oil Co. will join major international oil companies, traders and customers as founding partners in a platform operated by ICE for the trading of futures contracts in Abu Dhabi’s flagship Murban crude, ADNOC CEO Sultan Al Jaber said in a speech earlier Monday. Murban futures will allow buyers to hedge in the open market, he said.

Trading start

Murban crude futures are likely to begin trading around June, and are set to be the benchmark for other Abu Dhabi grades, Al Jaber said in an interview after ICE’s announcement. ICE will be a majority shareholder in the Abu Dhabi futures exchange, he said.

Murban is ADNOC’s most plentiful grade, at about 1.7 million barrels a day, and accounts for more than half of the crude pumped in the United Arab Emirates. Abu Dhabi holds most of the oil in the UAE, the third-largest producer in the Organization of Petroleum Exporting Countries.

Crude benchmarks

Abu Dhabi won’t be the first regional producer to offer futures contracts for its crude. Oman and the neighboring UAE emirate of Dubai joined with CME Group in 2007 to start the Dubai Mercantile Exchange to trade Omani crude futures. Oman, Dubai and Saudi Arabia are the only producers in the Gulf to price off the contract; most of the others base their monthly crude pricing on the Dubai and Oman crude price assessments by S&P Global Inc.’s Platts.

There is room for more than one benchmark in the region, and the Oman and Murban markers could act as reference points for different crude grades and qualities, Al Jaber said. Murban is lighter and more sweet, while Oman is heavier and more sour, he said.

Murban is lighter and contains less sulfur than most Middle Eastern crudes, making it easier to refine. It generally fetches higher prices on global markets and is similar in quality to Brent crude, the global benchmark. Brent crude futures are traded on the London-based ICE Futures Europe Exchange.