Pricing exports against the DME Oman crude futures contract will start on June 1st.
Dubai's government will begin pricing its oil exports against the Dubai Mercantile Exchange (DME) Oman crude futures contract from its launch on June 1, the DME said on Wednesday.
Dubai, which has previously used price-reporting agency Platts, is the second Middle East oil producer to back the DME contract. The government of Oman has already pledged to use the new contract to price its oil.
Oman's backing had raised expectations among oil traders that if the contract succeeded, other Middle East producers would also use the exchange to price their crude.
"The government of Dubai will cease pricing its export crude oil sales off its current mechanism and instead utilise DME futures prices upon launch of the exchange," the DME said in a statement.
The DME, which is backed by the New York Mercantile Exchange (NYMEX), is battling for the Middle East sour crude futures market with the Atlanta-based InterContinental Exchange (ICE). The ICE launched a Dubai sour crude futures contract linked to the Platts price last week.
The DME is scheduled to begin trading its Oman contract at 0200 Dubai time on Friday (2200 GMT on Thursday). The first contract will be for August crude.
The Middle East supplies over 30% of the world's oil but no exchange has previously established a successful contract linked to that market.
Dubai, the Gulf trade and tourism hub that is one of seven emirates comprising the United Arab Emirates, produces just under 100,000 barrels per day of crude.
The bulk of the UAE's 2.5 million bpd of crude output is produced in the emirate of Abu Dhabi.
The Dubai and Oman governments each have a stake in the DME. Dubai's state-owned Tatweer owns 32.5%, while government-owned Oman investment fund owns 30%. The NYMEX, host of the U.S. benchmark light sweet crude contract, also owns 32.5%.
The Dubai and Oman physical markets are already used to price around 12 million barrels per day of Middle East oil exports to Asian refiners, around 15% of global supply.
Delays in regulatory approval had forced the DME to postpone its Oman contract launch date to June 1 from May 1. The delay allowed the ICE to get a head start with the launch of its Dubai contract.