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02 March 2024

DME sees second-highest volume of contracts traded

By Shashank Shekhar

Dubai Mercantile Exchange (DME) said the average volume of contracts traded per day (ADV) in January reached 2,052, the second-highest monthly ADV behind November's record of 2,082.

On Monday, the DME saw 4,299 contracts being traded, a high volume compared to the past two years.

The average volume of contracts traded per day (ADV) during the first week of February at the exchange stood at 2,720 – the highest average weekly volume for the exchange.

On January 13, volumes at the exchange hit 6,484, a new DME record for contracts traded on a given day.

The previous DME record came in November last year, almost immediately after DME made an announcement of migrating to the Chicago Mercantile Exchange (CME) platform.

Each contract comprises of a thousand barrels of oil.

Ironically, these surges have come in tandem with a gloomy global oil markets.

Volumes have grown at DME, as they melted away from the Nymex.

A rising differential between WTI crude and ICE traded Brent has forced buyers to look for alternatives and the DME is emerging as a viable option according to recent news reports.

DME officials have, however, avoided accepting that the rising differential has anything to do with the rise in trade and have said that the move to CME platform and a resulting global exposure has brought buoyancy in trade. DME would focus on ensuring that more Middle East oil producers begin to use the Oman crude as a benchmark in the coming years, said CEO Thomas Leaver. Leaver, who heads the exchange that witnessed a surge in activity in 2009, said the exchange does not plan to launch more contacts in the near future. DME will focus on markets "East of Suez", he said.

"We recognise that we are a young exchange, and we have a way to go before we can start rivalling well-established global leaders in the Exchange space such as the CME (Chicago Mercantile Exchange) group, or Nymex.

"The DME has created a transparent pricing methodology for oil destined for the East of Suez markets, the majority of which comes from the Middle East," he said.

Oil demand is expected to still surge in Asia and the Middle East amid the crisis is also propelling the exchange, oil economists believe.

Attracting Asian buyers especially from major consumers like Japan and South Korea and ensuring that each of the GCC country benchmarks their oil on their platform can work wonders for the exchange, they add.

Volumes at DME still stand a pittance compared to daily volumes traded at Intercontinental Exchange (ICE) – where the daily volume for Brent alone goes beyond 500,000 contracts.

"They need to get Asian buyers, for an instance Japanese buyers trading on their exchange," says Robin Mills, a Dubai-based oil economist.

"They need more Middle East producers using the Dubai benchmark," he added. Apparently none of the GCC oil producers use the DME Oman crude futures benchmark to price their oil.

"If they did, that could have drawn a lot of hedging activity to the exchange."

Oman crude rises

Oman crude oil rose on expectations that cuts by Opec will limit supplies available to refiners.

Oman crude for April loading was offered at a premium of 25 cents a barrel over the price of benchmark Dubai oil, higher than the 50 cent a barrel discount last week, said three traders.

Abu Dhabi's Murban crude rose seven cents to a premium of 18 cents a barrel. Qatar Marine for April rose two cents to a premium of 19 cents a barrel to its selling price.