Gas Week

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Rivals attempt to create benchmark futures contracts to trade Middle East crude oil but lack of interest means little competition for Brent and West Texas Intermediate

Posted by gasweek on 18 September, 2007

Two rival attempts to create a benchmark futures contracts to trade Middle East crude oil, but trading volumes in the two contracts, launched three months ago, evaporated in August and traders said they were now unlikely to recover significantly after the holiday period, reported The Australian (6/9/2007, p.28).

Middle East benchmark search continues: The failure to draw interest, in particular from Asian refineries, is the latest setback to create a Middle East benchmark that could compete with Brent and West Texas Intermediate. The Rival Middle East contracts were launched in June by the US-based InterContinental Ex-change and Dubai Mercantile Exchange, a joint venture between the New York Mercantile Exchange and Dubai and Oman governments.

Not enough interest: “The contracts have failed to attract enough critical mass,” said a trader involved in both contracts. “There is not enough interest both from the sellers in the Gulf region and from the buyers among the Asian refineries side.”

No trades at all on some days: The ICE Middle East contract even failed to trade on three separate days last month and the DME’s Oman contract traded just 25 lots one day in August. Volumes in both Brent and WTI are usually above 50,000 lots. “It always has been the case that Asia refineries are price followers rather than settlers. This would take some time,” King said.

The Australian, 6/9/2007, p. 28

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