Middle East crude derivatives hit record high in 2024; ICE Dubai traded volumes up 24% YOY

The total traded volume for key crude oil futures contracts across all three major exchanges rose in 2024, with Intercontinental Exchange and ICE Futures Abu Dhabi breaking record highs in a year that saw the complex hindered by demand concerns from China and escalating geopolitical tensions.

Total traded volumes of Dubai crude futures on ICE rose 24.4% year over year to 20.8 million lots in 2024, equivalent to 20.8 billion barrels, marking the highest level since S&P Global Commodity Insights started compiling ICE data in January 2017.

On a monthly basis, traded volumes for ICE Dubai crude futures -- comprising Dubai first-line futures, Dated Brent versus Dubai 1st Line futures and Brent 1st Line versus Dubai 1st line futures -- reached a record-high 2 million lots in May, the data showed. One lot is equivalent to 1,000 barrels.

"Given the lower volatility, traders need to put more size to obtain the same returns," a crude derivatives trader said.

The surge in trading activity on ICE saw the number of Dubai derivatives that settled against Platts cash Dubai assessments rose to an annual record of 21.2 billion barrels, Commodity Insights data showed. Apart from ICE, Dubai derivatives are also traded on NYMEX and Tokyo Commodity Exchange.

Mirroring the derivatives market, the physical market also saw similar record-breaking activity, as the number of partials traded during the Platts Market on Close reached 8,666 in 2024, equivalent to 216.7 million barrels, surpassing the previous annual record high of 6,234 trades set in 2023.

The number of convergence cargoes declared on the MOC over 2024 stood at 312, exceeding the last annual high of 209 in 2015. A convergence occurs when 20 of the 25,000-barrel partials are traded between two counterparties in the same direction, resulting in a full 500,000-barrel physical cargo being declared from the seller to the buyer.

In 2024, cargoes that were declared comprised nine Dubai, 126 Upper Zakum, 110 Oman, 30 Al-Shaheen and 37 Murban cargoes.

IFAD's Murban

Similarly, total traded volumes for Murban crude oil futures more than doubled to 6.04 million lots in 2024, surging 3.75 million lots year over year -- the highest since the launch of the contract on March 29, 2021, the latest full-year data from the exchange showed.

Furthermore, total traded volumes for Murban 1st Line futures rose 620,995 lots, or 66.49%, year over year to 1.55 million lots in 2024.

Murban crude -- a light sour crude with a gravity of 40.5 API and sulfur content of 0.74% -- is Abu Dhabi National Oil Co.'s largest crude by volume, accounting for about 2 million b/d of production capacity. It typically sees baseload demand from certain refineries in Japan and Southeast Asia, but in recent months, it has been facing stiff competition from arbitrage barrels from the US.

ADNOC sets the official selling price of its flagship Murban crude based on the monthly average of the Murban's Singapore marker price on the IFAD, while the OSP for its other grades, Upper Zakum, Das Blend and Umm Lulu, are set as a differential to Murban OSP.

"I think also there are more participants entering this instrument, maybe for more speculative or hedging requirements," a crude derivatives trader said.

GME Oman

On the Gulf Mercantile Exchange, traded volumes for Oman crude futures edged up 12.11% year over year to 1.32 million lots in 2024.

The volume includes both Oman futures traded on the Globex trading system as well as privately negotiated trades cleared on CME ClearPort.

Similar to 2023, all contracts traded on GME in 2024 were made up entirely of Oman crude futures. The GME also lists other crude futures contracts, which include Oman crude financial futures and Brent/Oman futures spread.

The Omani grade has a gravity of 33.2 API and a sulfur content of 1.3%. It usually sees most of its exports going to China, with some barrels also going to Taiwan, Japan, South Korea and India.

Market eyes surplus in 2025

In 2024, global oil markets saw a lower-than-expected demand growth, largely capped by the sluggish economic recovery from China -- the world's largest importer of crude -- while trade flows were unaffected despite the geopolitical events in the Middle East.

"Despite tensions, the lack of disruption to oil supply has meant that the market has become increasingly immune to developments in the Middle East," ING's Head of Commodities Strategy Warren Patterson said.

As 2025 starts, a ratcheting up in trade tensions remains a key concern for the complex, as retaliatory responses to the proposed tariffs plans under the Trump administration could see US demand taking a hit, thereby pressuring WTI-Brent spread, analysts said.

Markets remain focused on OPEC+ as the bloc is expected to extend cuts further if needed in 2025, with brewing disagreement between the group that could see some members producing above production targets.

"Maintaining my outlook for a balanced to slightly oversupplied market in 2025, with Brent averaging in the range of $71-$75/b," Vanda Insights' CEO Vandana Hari told Commodity Insights Jan. 15. "However, in view of Trump's avalanche of threats and rhetoric against major economies over the past 2-3 weeks, I see higher probability of uncertainty and shocks, even if short term, impacting demand as well as supply or the sentiment thereof."

The Middle Eastern crude market has also been seeing heightened volatility in recent days after the US and the UK announced a fresh package of sanctions on Russia's energy sector Jan. 10, as the countries double down on a recent push to hit Moscow's oil revenues.

Platts, part of Commodity Insights, assessed the spread between front-month Platts cash Dubai and same-month Dubai swap at $3.855/b Jan. 15, the widest since $4.64/b reached Sept. 29, 2023. The spread averaged $2.18/b in January to date, compared with the $1.109/b average in December 2024.