Dubai Mercantile Exchange (DME) is in talks with Asian refiners and state oil companies to price contracts against the Gulf exchange, making it a benchmark, as it bids to increase its core volumes to 1 million barrels per day, its chief executive officer said on Monday.
Thomas Leaver, speaking at the Reuters Middle East Investment Summit, said talks are underway with Saudi Aramco, Abu Dhabi National Oil Co, Kuwait Petroleum Corp and Qatar Petroleum among others. "We are engaging at every level to try and push this and there is movement," he said. "The collapse of prices in July has heightened their awareness of the fragility of the market.
"They're very conservative, we don't know how quickly they'll move but they're aware that something needs to be done." Leaver said that conservatism meant state oil firms, despite their familiarity with the process, would not act quickly. "You have to get buy in at every level," he said, citing Aramco as an example. "They're very au fait with how this would work but it takes time to overcome that inertia.
"If Saudi goes, others will follow." Leaver said the DME was in talks with Iran as well, noting the country was "more interested in fair value and price transparency" than worrying about pricing in US dollars.
DME, a joint venture between Oman, Dubai and the New York Mercantile Exchange, wants to boost its core contract to commercial levels and turn Dubai into a pricing hub, like Singapore and New York. "I personally think we'll be bigger than WTI," he said. "We want to get to big multiples - as big as the WTI contract which is 1 million barrel per day, eventually. There is a tipping point.
"The regulatory environment in UAE makes for a better climate and other Gulf states realise that you only need one benchmark for the region." DME, while focused on its core contract, has looked at 16 different products in the region, including condensates and liquefied petroleum gas but gave no timeline for a launch.
"The energy side has the most go," Leaver said, adding DME had shelved airline industry requests a jet fuel contract. The DME launched its Oman contract last year as the first Middle East sour crude futures contract to have the backing of oil producers. It also launched its DME Brent Crude Oil Financial contract and the DME Oman Crude Oil Financial Contract.
The DME sold stakes this year to Morgan Stanley, Goldman Sachs, Concorde Energy, oil trader Vitol, Chicago-based Casa Energy Trading and a company owned by Royal Dutch Shell. NYMEX, Dubai's state-owned Tatweer and the Oman government now each owns 25 percent of the DME, while DME floor members continue to hold the remaining 5 percent.
Leaver said he "would not rule out" an initial public offering by the exchange but it was too early in the DME's development while an increase in stakeholders was also not palatable for now. "If we get more vested interest ... it can only be good for the exchange," he said. "But shareholders are unlikely to accept further dilution.