“This means that the physical price of oil and the paper price will converge,” he said. Posted on 04/17/2006 5:15:52 PM PDT by M. Espinola
Dubai Mercantile Exchange Oman has agreed to supply crude oil to back the planned launch of the Middle East’s first oil futures contract.
The government of Oman is working with the new Dubai Mercantile Exchange to launch the crude futures contract this year as oil prices in other markets stand near record levels.
The decision by Oman, one of the few Middle East producers not in the Organisation of the Petroleum Exporting Countries, is a significant step forward for the DME, as it gives potential users of its crude oil contract the option to take physical delivery or settle financially.
“Without the backing of an oil producer, it would have been very difficult to launch a contract,” said Gary King, chief executive officer of DME.
“This means that the physical price of oil and the paper price will converge,” he said.
The move has the potential to usher in a new era of price setting in Middle East sour crude, which has a higher sulphur content than North Sea oil. The price could be based on a regional benchmark set on the DME rather than worked out as a discount to the light sweet future crude contracts traded in London and New York.
London Brent crude futures hit a record $71.40 a barrel yesterday before falling back, and US oil futures touched $70 a barrel in early trading in Asia, as Iran’s nuclear ambitions continued to worry the markets.
Oil for May delivery was trading on the New York Mercantile Exchange at $69.60 late yesterday morning, off its high but up 28 cents on the day, and not far from the overnight high of $70.85 reached in the aftermath of hurricane Katrina in August.
Brent crude was at $71 a barrel on the ICE futures market, up 43 cents but also off its high earlier in the day.
A working group for the project has been set up, with staff from Oman’s oil and gas ministry, its finance ministry, the DME and Nymex, its 50 per cent shareholder. The DME’s other joint owner is Dubai Holding, a company owned by Crown Prince Sheikh Mohammed bin Rashid al-Maktoum.
The setting up of the DME is another leg in Dubai’s strategy to become a financial centre.
“The creation of a successful, physically linked Middle East sour crude oil futures contract is a concept we sincerely support, given our role in the pricing of Middle Eastern crude,” said Nasser bin Khamis Al Jashmi, the under-secretary of oil and gas for Oman.
Just more worldwide insanity.
Nothing continues forever. The party for Persian Gulf based OPEC tyrants is about to be seriously disrupted.
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