Commodity Online
DUBAI : In a significant move on Tuesday, the Dubai Mercantile Exchange (DME) said Dubai Department of Petroleum Affairs (DPA) will set the official monthly selling price (OSP) for UAE’s crude oil based on a differential to the settlement price of the DME's Oman Crude Oil Futures Contract.

Speaking to reporters here Abdulla Abdul Karim, Director of the Department of Petroleum Affairs said, "Dubai has priced its oil in relation to the DME from the launch of the Exchange in June 2007.

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"Now, by announcing a forward price based on the DME Oman contract, we will signal to the markets the price of Dubai crude in relation to Oman, further strengthening the commitment to price transparency and fair value for Middle East Crude oil.

Dubai has traditionally acted as the benchmark crude oil for Middle East producers, who price cargoes at a differential to published estimates of Dubai/Oman prices, typically set retroactively for the previous month.

In moving to futures pricing, the OSP for month "M" will now be set in advance, with the differential set in M-3, and the final OSP calculated at the end of M-2.

"The DME Oman contract continues to gain global acceptance as a fair and robust price discovery mechanism for crude oil destined for East of Suez markets."

Welcoming the decision, Ahmad Sharaf, Chairman of the DME said, "This announcement, coming so quickly after the DME's second anniversary of successful trading, demonstrates the enduring strength of the partnerships that the DME enjoys with its core shareholders in the Dubai and Omani governments.

The transition also reinforces the ever-growing acceptance of the DME's Oman contract as the third global crude oil benchmark, trading on the CME Globex trading platform of our other core shareholder, the Chicago Mercantile Exchange." Tom Leaver, Chief Executive Officer of the DME, added.