E-mail Article

Printer Friendly

Share Article

Future potential

Considering that the Middle East is the world's biggest oil exporter - and has been for some time - it seems faintly ludicrous that the major centres of energy trading are in the West and the Far East.

Perhaps in the past this region suffered from a lack of expertise in the sector, but one only has to look at the development of the Middle East's stock exchanges and the establishment of dedicated financial centres for evidence that that is no longer the case.
The upcoming launches of the Dubai Mercantile Exchange (DME) and the IMEX exchange in Qatar signal the region's impressive ambitions, but they need to become internationally significant.

Until traders are regularly checking their screens for the movements of a Middle East benchmark, the region's finance sector will remain in the second tier. Things look promising: the DME is to trade a futures contract in Oman sour crude, which is bound to become more important to the energy trading community as supplies of sweet crude run low. The exchange's jet fuel futures contract is also likely to trade in high volumes, after many of the world's airlines suffered damage to their balance sheets due to the absence of a hedging strategy when fuel prices spiked last year. The Dubai Gold and Commodities Exchange is trying to find areas where it can be a world leader, but many of its contracts are already extremely popular with traders from the Indian subcontinent. Although its contract for Fujairah bunker oil futures has not been traded in great volumes yet, it is a strategically important commodity that could be very successful with the support of a few large players. The DGCX is currently considering gasoline and steel futures, contracts likely to be popular, while IMEX will focus on the Middle East's reserves of natural gas, which constitute about 40% of the world total.

However, creating strong commodities exchanges in the Middle East will have another beneficial effect. The region's refiners, which are currently having to hedge using overseas exchanges, will be able to do so closer to home. This should bring a large degree of liquidity to the markets, something that is essential if they are to succeed.

And there is another asset that favours the region: its time zone. The Gulf is perfectly positioned to continue energy futures trading when Singapore has closed and Chicago is yet to open. The Middle East has the world's attention right now. If it can capitalise on the resources it has been given, then the region could become an indispensable part of the futures trading world.

No Comments