The first month of trading volumes at the Dubai Mercantile Exchange (DME) closed with 4,000 contracts going for physical delivery, the exchange announced today.
Oman’s Crude Oil Futures Contract saw a total of 4,000 contracts in its first month, equivalent to four million barrels of crude oil going for physical delivery in August.
The total volume of traded Oman Crude Oil Futures Contracts is equivalent to 39.5 million barrels of crude oil. The size of the Middle East’s first and only physically-backed energy futures contract is 1,000 barrels per contract.
The exchange reported a total of 58,365 contracts traded during June, of which 39,571 were Oman Crude Oil Futures Contracts. This number of contracts going for physical delivery has only been exceeded once, by NYMEX’s WTI benchmark in January 1995.
At the end of trading on Friday, exchange-wide open interest for all three listed contracts was 6,660, of which 6,467 was Oman Crude Oil Futures Contract.
“The high number of contracts going for physical delivery in August certainly confirms the market’s need for a physically delivered rather than a financially settled crude oil futures contract,” said Ahmad Sharaf, chairman of the DME.
“The backing we have received from both the Oman and Dubai governments in adopting forward pricing of their crude oil has been instrumental in this,” Sharaf added.
Oman decided to adopt forward pricing of its crude oil based on DME settlement prices last November, abandoning its past practice of retroactively pricing the sultanate’s crude oil.
The move was seen as the government’s support for price transparency and obtaining fair value for its Middle East sour crude oil.
Oman’s Ministry of Oil and Gas officially informed its customers that the first official selling price (OSP) for their August crude oil cargoes is $66.05 per barrel.
“We have now been through one full cycle of trading and can already see some very encouraging trends in the market,” said Gary King, CEO of the DME.
“We see strong evidence that traders are using the contracts as a tool to hedge their price risk. This will increase as the exchange continues to evolvel,” he added.
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