At a time when highly leveraged U.S. exploration and production (E&P) companies have been struggling with dwindling valuations, shrinking credit lines, and mounting bankruptcies, Middle East state-owned oil and gas companies (NOCs) appear to be having little trouble courting foreign investors. The majority of investors are aware of oil giant Saudi Aramco’s moves, including its IPO and (self-estimated) $2 trillion valuation. Few, however, know about the other Middle East oil giant that could actually beat Aramco to the public punch: The Abu Dhabi National Oil Company (ADNOC).
Faced with a specter of shrinking oil demand and a global shift to greener energy, the United Arab Emirates (UAE)—of which Abu Dhabi is the capital—is pulling all stops to fully monetize its considerable hydrocarbon resources.
The Emirates’ latest exploit: Opening trade in its Murban crude to compete with WTI and Brent crude.
Abu Dhabi has just launched the Murban crude futures contract, offering a potential rival benchmark for trading Middle East crude.
The contract will be traded on the new ICE Futures Abu Dhabi (IFAD) oil exchange.
IFAD partners include PetroChina (NYSE:PTR), BP Plc (NYSE:BP), Total (NYSE:TOT), Vitol, Inpex, Japan’s Eneos Holdings, South Korea’s GS Caltex, and Thailand’s PTT Plc. The IFAD launch was delayed by nearly a year due to the COVID-19 pandemic.
Murban is a light sweet crude with an API gravity of 39.9 degrees and a sulfur content of 0.78%.
Middle East Benchmark Abu Dhabi has an ambitious plan for Murban crude to benchmark Middle East crude, good for a fifth of global crude supply.
The Murban contract will price the flagship Abu Dhabi grade that accounts for more than half of ADNOC’s production, thus offering an alternative benchmark to Oman crude futures traded on the Dubai Mercantile Exchange (DME) and Dubai, operated by S&P Global Platts.
The Gulf’s biggest producers—including Saudi Arabia, UAE and Iraq—have traditionally priced their crude using foreign benchmarks from other regions. The Arab nations have mostly sold their crude directly to refiners or international companies with stakes in their fields but also crucially prevented those customers from re-selling that oil and benefiting from arbitrage opportunities.
Abu Dhabi hopes that relinquishing control over prices of Murban to investors and traders will fortify its position in the international oil market. The main goal is to make crude more attractive to refiners in Asia, where oil producers are battling for customers as Western governments attempt to phase out fossil fuels.
Once sold, Murban will be sent by pipeline to Fujairah, where Abu Dhabi’s desert fields connect with global markets. To help this cause, ADNOC plans to spend nearly a billion dollars building ~40 million barrels of storage space in caverns beneath Fujairah’s mountains. By adding to ADNOC’s existing storage, the port will have ample space to hold enough Murban to manage any future supply disruptions.
In fact, Fujairah will hold enough Murban to provide a level of liquidity in-line with, or greater than, that by leading benchmarks such as WTI and Brent.
Middle East Benchmark Abu Dhabi has an ambitious plan for Murban crude to benchmark Middle East crude, good for a fifth of global crude supply.
The Murban contract will price the flagship Abu Dhabi grade that accounts for more than half of ADNOC’s production, thus offering an alternative benchmark to Oman crude futures traded on the Dubai Mercantile Exchange (DME) and Dubai, operated by S&P Global Platts.
The Gulf’s biggest producers—including Saudi Arabia, UAE and Iraq—have traditionally priced their crude using foreign benchmarks from other regions. The Arab nations have mostly sold their crude directly to refiners or international companies with stakes in their fields but also crucially prevented those customers from re-selling that oil and benefiting from arbitrage opportunities.
Abu Dhabi hopes that relinquishing control over prices of Murban to investors and traders will fortify its position in the international oil market. The main goal is to make crude more attractive to refiners in Asia, where oil producers are battling for customers as Western governments attempt to phase out fossil fuels.
Once sold, Murban will be sent by pipeline to Fujairah, where Abu Dhabi’s desert fields connect with global markets. To help this cause, ADNOC plans to spend nearly a billion dollars building ~40 million barrels of storage space in caverns beneath Fujairah’s mountains. By adding to ADNOC’s existing storage, the port will have ample space to hold enough Murban to manage any future supply disruptions.
In fact, Fujairah will hold enough Murban to provide a level of liquidity in-line with, or greater than, that by leading benchmarks such as WTI and Brent.