Murban futures attract 'good mixture' of physical, financial traders: IFAD president

Dubai — The first day of Murban futures attracted a "good mixture" of physical and financial traders, with at least one target already achieved, according to Jamal Oulhadj, president of ICE Futures Abu Dhabi where Murban trading started on March 29.

"One of our targets was to achieve liquidity in the first six months of the curve and we achieved that on the first day with trading out to December 2021," Oulhadj told S&P Global Platts in a written response to questions.

Abu Dhabi National Oil Co., the UAE's biggest energy producer, together with the Intercontinental Exchange launched IFAD on which the Murban futures contract traded, a move that may create a new oil benchmark and boost crude exports from Fujairah.

"Fujairah is a great location. It has incredible loading capacity," Oulhadj said, when asked how the futures will affect the UAE east coast emirate. "Fujairah is one of the major bunker hubs around the world and the ability of Murban futures to deliver into Fujairah is definitely advantageous."

Through IFAD, delivery of Murban, ADNOC's flagship crude that accounts for nearly half of its production capacity of 4 million b/d, can take place in Fujairah, where most Murban volumes are already exported from.

8,854 lots

The first day of trading saw 27 firms trade, he said, declining to say who made the first trades. A total of 8,854 lots were traded, including 6,344 ICE Murban crude oil futures contracts and 2,510 Murban related cash settled derivative contracts, according to ICE.

"When we set out on this project we were keen to build a contract that had screen liquidity with trades out for six months down the curve, with a broad range of contracts traded," Oulhadj said, when asked about expected volume for the first month. "We have achieved that so far and we will be working now to develop this further. We had tight bid-offer spreads with a 4 cent market between the bid and the offer."

Asked when options will start, he said: "We will keep you updated when we have any news to share."

IFAD was launched along with nine partner companies that include BP, GS Caltex of South Korea, Japanese companies Inpex and ENEOS, PetroChina, Thailand's PTT, Shell, Total and Vitol. Murban is popular with Asian refineries which are showing increasing appetite for light sour crudes.

"As we are speaking to Asian refiners, to producers, consumers that have a nexus into Abu Dhabi oil, we're talking about how they can use this contract to help manage that price risk and also to then be more thoughtful about future investments and about the way they allocate their capital," Stuart Williams, ICE Futures Europe president, said in an online interview with Gulf Intelligence on March 31. ICE regularly talks with Saudi Aramco and other producers, and "now we have another conversation" about how they might use Murban, he said.

He also said the US may have contributed to the interest in Murban trading. "The additional competition brought by US barrels coming into Asia was, we think, one of the reasons why the market started to look for alternative options around pricing," he said. "So that in a sense has helped to create some impetus to the whole project."