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ICE Dubai crude futures trading volumes hit one-year high in March


Dubai crude futures volume rises 23.50% in March

Higher volatility prompts hedging

  • Author
  • Reetika Porwal    Rohan Gupta
  • Editor
  • Manish Parashar
  • Commodity
  • Oil Shipping

Total trading volume of Dubai crude futures forward curves on the Intercontinental Exchange surged in March as higher volatility brought about by the interplay of bullish and bearish developments increased the market's hedging needs.

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Across the forward curves, the combined trading volume for ICE Dubai futures contracts -- including the Dubai first-line futures, the Dated Brent versus Dubai 1st Line futures, and the Brent 1st Line versus Dubai 1st line futures -- was 892,766 lots in March, ICE data showed April 1. One lot is equivalent to 1,000 barrels.

This figure is 23.50% higher than the corresponding figure of 722,889 lots seen in February, and is the highest on record since the early days of the coronavirus pandemic in March 2020, when oil demand plummeted due to lockdown measures globally. A total of 1.10 million lots were traded in March 2020.

The surge was powered by a 32.71% increase in volume across the forward curve for Dubai 1st line futures.

A total 621,276 lots of Dubai 1st line futures were traded in March, up from 468,160 lots in February, and the highest on record since April 2020, when 644,114 lots were traded, ICE data showed.

The trading volumes for the Brent 1st Line versus Dubai 1st line futures and the Dated Brent versus Dubai 1st Line futures also rose 5.54% and 32.45% across the forward curves at 258,473 lots and 13,017 lots, respectively.

Open interest volumes

As of March 31, the combined open interest volume for the Dubai crude futures forward curves was 575,048 lots, up 3.78% from the 554,115 lots seen on Feb. 26, ICE data showed April 5.

The increase in open interest volumes was mainly due to 6.28% and 13.20% upticks in the open interest volumes on the Dubai 1st Line futures curve and Dated Brent vs Dubai 1st Line forward curve at 306,056 lots and 23,654 lots, respectively.

The forward curve for the Brent 1st line vs Dubai 1st Line futures was largely steady, with volumes inching up 0.04% at 245,338 lots.

Zooming into the data, total open interest for front-month ICE Dubai crude futures contracts increased 7.46% at 104,131 lots by March 31.

Open interest for front-month Dubai 1st line futures fell 3.91% at 57,220 lots, whereas open interest for the less liquid Brent 1st Line vs Dubai 1st Line futures and Dated Brent vs Dubai 1st Line futures increased 60.51% and 18.87% at 9,679 lots and 37,232 lots, respectively.

Markets react to volatility

The rise in trading and open interest volumes on the forward curves seen in March came amid increased volatility in the market.

The month started strongly when the OPEC+ alliance surprised the market by rolling over production quotas into April despite the bullish atmosphere, with Saudi Arabia further choking off supply by extending its 1 million b/d output cut into April.

At the same time, the demand outlook for oil took on a bullish hue, as COVID-19 vaccination efforts in major economies such as the US and UK picked up.

A $1.9 trillion stimulus package in the US also raised the prospect of higher oil demand from an expeditious economic recovery.

However, concerns over the progression of the pandemic in Europe festered in the background, before prompting two separate selloffs on March 17 and March 23.

Further volatility in the market ensued when the Ever Given container ship ran aground at the Suez Canal on March 23, blocking shipping flows for six days through the canal -- a critical commodity chokepoint that facilitates almost 10% of total seaborne oil trade.

The front-month Brent contract rose and fell within a wide range of $8.09/b in the second half of March due to the interplay of coronavirus concerns and news about the status of the container ship.