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ICE says Chevron, Trafigura, Occidental sign MOU on Murban futures for US crude to Asia

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Mapping out ADNOC’s downstream ambitions

ICE says Chevron, Trafigura, Occidental sign MOU on Murban futures for US crude to Asia

Highlights

ICE to launch Murban futures on March 29, 2021

Murban futures to be launched on a UAE exchange

Trafigura, OXY Energy comment

Dubai — The Intercontinental Exchange has signed a memorandum of understanding with Chevron, Trafigura and Occidental to explore using the upcoming Murban futures contract to price US crude oil heading to Asia, a company official told the ADIPEC virtual forum Nov. 10.

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The companies "are exploring the use of Murban to export US barrels to Asia," Stuart Williams, president of ICE Futures Europe, said.

The Intercontinental Exchange said Nov. 9 it plans to launch Murban crude futures trading at an exchange in Abu Dhabi on March 29 next year after it delayed the startup in the first half of 2020 due to the COVID-19 pandemic.

ICE and Abu Dhabi National Oil Co., the UAE 's biggest energy producer, announced plans to start a derivatives trading platform in November 2019, to be hosted on the new ICE Futures Abu Dhabi exchange, in partnership with nine international energy companies.

ADNOC and ICE are partnering with BP, GS Caltex, Inpex, ENEOS, PetroChina, PTT, Shell, Total and Vitol to launch IFAD. The breakdown of shareholding has not been disclosed.

SWEET CRUDE

"As one of the largest exporters of US crude to Asia, we are pleased to explore opportunities to utilize the new price benchmark for light sweet crude oil that Murban Futures will provide," Fred Forthuber, president of Oxy Energy Services, said in an ICE statement. "Murban moving to forward looking pricing, as a futures contract, is another great step in the evolution of the oil market."

The ICE Murban futures will be complemented with a range of cash settled derivatives, including outright, differential and crack differentials against Brent, WTI, gasoil and naphtha among others, as well as inter-commodity spreads, which are planned to launch alongside Murban futures, ICE said.

"The Murban futures contract is a positive development in enhancing transparency for oil markets and very relevant to us as an active participant in crude oil trading in the Arabian Gulf and as the largest exporter of US crude. We look forward to playing an active part in the new benchmark," Daniel Yuen, head of crude Asia for Trafigura, said in the ICE statement.

There was no comment from Chevron in the statement, and the company didn't immediately respond to a request for comment.

IFAD, which will be ICE's 13th exchange, will benefit from the appetite for a new transparent benchmark that will "bulk out the sweeter products we already host on our markets," Williams said.

Murban is ADNOC's flagship crude, one of four it sells. The three others are Upper Zakum, Das and Umm Lulu.

Murban, produced onshore in Abu Dhabi, has a total production of approximately 1.7 million b/d, most of which is exported, largely to Asia, with Abu Dhabi retaining the balance for domestic refining. The crude, with a gravity of 40.5 API and sulfur content of 0.78%, is considered light sour by Asian refiners.

Murban will be the second physically delivered futures contracts traded on a regional exchange after Dubai Mercantile Exchange 's Oman crude futures.

It is also a deliverable grade in the S&P Global Platts benchmark Dubai and Oman crude assessments.

30 COUNTRIES

Some of the nine oil companies with stakes in IFAD are already partners with ADNOC.

BP (10%), Total (10%), INPEX of Japan (5%) and GS Caltex of Korea (3%) are equity shareholders in ADNOC Onshore, which produces the Murban grade with ADNOC retaining a 60% stake in the concession. The other ADNOC Onshore partners are CNPC (8%) and ZhenHua Oil (4%).

ADNOC's partners in producing Murban export more of the grade than the national oil producer, Philippe Khoury, executive vice president of marketing, supply and trading at ADNOC told ADIPEC. Around 30 countries and refineries in Asia process Murban, he added.

IFAD will be based in the Abu Dhabi Global Market, the UAE's capital international financial free zone, alongside ADNOC Trading, a new unit focused on trading oil that started operations in September. Next month, ADNOC Global Trading, a joint venture with OMV and Eni focused on trading of refined products, will kick off operations also in ADGM.

ADNOC's future marketing push will not be limited to Abu Dhabi, Khaled Salmeen, executive director of marketing, supply and trading at ADNOC, told ADIPEC.

"Definitely the business plan would be that we grow into Singapore, into Europe and eventually maybe even have some representation in the US," Salmeen said.

"We start with a 1 million refinery behind us and the ability to use our international storage that we have already, and our relationship with VTTI that allows access to multiple locations around the world."

ADNOC, which has storage facilities in the UAE, Japan and India, last year acquired a 10% stake in storage terminal owner and operator VTTI, which will help expand its operations globally and in Fujairah.