(Bloomberg) -- Oil-rich Abu Dhabi will open a commodities exchange in March to rival those of Middle Eastern neighbors and allow investors to trade its crude using futures contracts for the first time.
The ICE Futures Abu Dhabi exchange will open on March 29 and offer contracts based on the emirate’s flagship Murban crude grade, pending regulatory approvals, Intercontinental Exchange (NYSE:ICE) Inc. said in a statement Monday. The Atlanta-based operator of trading and clearing platforms is setting up the exchange with government producer Abu Dhabi National Oil Co. and other oil suppliers.
Abu Dhabi is the capital of and holds most of the oil in the United Arab Emirates, the third-largest producer in OPEC. Murban crude, pumped from onshore fields, makes up more than half the sheikhdom’s crude output, now at around 2.6 million barrels daily.
By selling through futures, Abu Dhabi will let the market determine the price of its oil. It’s a significant change for a producer that until this year fixed its pricing retroactively, effectively telling buyers the cost of barrels purchased a month earlier.
Adnoc wants Murban futures to serve as a regional benchmark for Gulf barrels heading east. Benchmarks help buyers in Asia, the biggest and fastest-growing oil market, to compare crude from the U.S., Europe, Africa and the Middle East.
Oman and the UAE emirate of Dubai joined with CME Group Inc. (NASDAQ:CME) in 2007 to start the Dubai Mercantile Exchange, which trades Omani crude futures. Oman, Dubai and Saudi Arabia price off those contracts. Most other producers in the Persian Gulf -- which pumps about a fifth of the world’s oil -- base their monthly pricing on Dubai and Oman crude-price assessments by S&P Global Platts.
Murban is lighter and contains less sulfur than most Middle Eastern crudes, making it easier to refine. It generally fetches higher prices and is similar in quality to Brent crude, futures for which are traded on the London-based ICE Futures Europe Exchange.
Vitol Group, BP (NYSE:BP) Plc, Royal Dutch Shell (LON:RDSa) Plc and Total SE were among the nine oil traders and producers that joined as partners in the planned exchange last year. Adnoc pushed back the start from the first half of last year, initially due to the need for regulatory approvals and then as the coronavirus pandemic upended markets.
Brent crude has doubled since April, when the Organization of Petroleum Exporting Countries and its partners agreed to cut output to meet plunging demand. But the global benchmark is still down about 39% this year.
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