One week-old Dubai Mercantile Exchange (DME) has pipped ICE Dubai in daily trades but the crude contracts share one flaw: declining volumes due to their failure to lure much interest in Asia, industry watchers said.

Little trade happens daily before London opens, again highlighting the reluctance of traders in Asia to trade futures contracts, either on the Atlanta-based IntercontinentalExchange (ICE) Dubai, or New York Mercantile Exchange (Nymex) backed DME.

Asian interest is crucial in the long term, as both the Oman and Dubai futures contracts target the market in this region, which prices some 12mn bpd of crude and condensate from the Middle East off Oman and/or Dubai crude.

“In terms of transparency and price, these two contracts are already a big step forward. But the issue is to have liquidity during the Asian time,” said Marc Lansonneur, managing director, commodity derivatives, for French bank Societe Generale in Asia.

After the initial excitement, trading volumes have started to fall. Only 166 lots of front-month August DME Oman were traded by 0830 GMT against 65 lots of August ICE Dubai. The volumes are sharply lower than Wednesday’s peak at the same time when 859 lots traded on DME Oman, against 449 lots for Dubai.

Trade usually picks as the 0830 GMT Asian settlement time nears.

Oman’s Ministry of Oil and Gas (MOG) will price its physical Oman crude as the average of daily assessments of front-month Oman trades between 0825 and 0830 GMT.
ICE Dubai has a one-minute Dubai marker and is settled monthly against the 0830 GMT Platts Dubai assessments.

But most of the daily trades pick up later, during London trading hours for ICE Dubai, and during New York trading hours for DME.



This may reflect the fact that Dubai and Oman are still defined as spreads, or the difference in prices, to global benchmarks Brent or West Texas Intermediate (WTI) crude, and will take time to change, industry sources say.

The DME, which took two years to realise and is supported both by Oman and Dubai, started off with larger volumes than ICE Dubai, and saw rapidly increasing volumes for the first three days, with a total 6,250 lots traded on Tuesday.

But interest waned on Wednesday and by Thursday, only 2,044 futures contracts traded. The total volume, taking into account WTI and Brent spreads to Oman was 3,456 lots, Reuters calculations show.

Rival ICE Dubai contract, which had an 11-day head start, reached a peak of 6,177 lots on May 29 and has since only managed to exceed the 3,000 daily lots once.

Traders said it was too early to write off either of the contracts, but hinted that a choice would have to be made down the road if the liquidity grows.

“ICE Dubai can succeed by virtue of its history and OTC market association, and DME by virtue of its revolutionary but necessary change,” said a Singapore-based trader.

“Eventually, it depends on Middle East producers. If they all switch to DME, then it is pointless to have Dubai pricing.”


Physical Oman and Dubai cargoes will price off DME from this month, which is seen as a major sign of support. But the contract’s success would depend on bigger producers, especially Saudi Arabia.

Saudi Aramco officials have said they would adopt a wait-and-see stance. The kingdom is likely to start trading or using DME pricing only when it is well established and widely used on the market.

Refiners will also have a say, by choosing how to hedge. “The people who will decide are the refiners. How do they want to price their crude, against Oman or Dubai? Then there will be a lot of support for the contract chosen,” another trader said. – Reuters