DME may propose fuel oil contract
Singapore, November 12, 2012
The Dubai Mercantile Exchange (DME), a premier international energy futures and commodities exchange in the Middle East, plans to propose a fuel oil contract at its board meeting in December, its CEO said.
The exchange, which trades the Oman crude grade, aims to expand its focus to refined products, particularly those that trade between the Middle East and Asia, and fuel oil is first on the list, Christopher Fix told Reuters on Monday..
"This process is one that takes about a year or so, to list a new contract ... what I plan to do is address these issues in the board meeting that's coming up in December, put our proposals on the table, ask for resources needed," Fix said in an interview.
The DME has yet to finalise details relating to specifications of the contract that will be offered, including whether customers are interested in 180-cst or 380-cst grade fuel oil, and the delivery mechanisms, Fix said.
Expanding into refined products will also help the exchange attract customers to its crude contracts.
"If you're a refiner, it will be ideal for you to have the refined products hedged against the same basket as your crude input," he said.
"We are interested in looking at the other parts of the barrel, fuel oil is interesting because it's a Gulf story."
Fix, however, declined to give a date by which the exchange would be ready to offer fuel oil contracts.
"There are a lot of technical issues that need to be ironed out before you can put a date on it," he said.
Fix was in Singapore to open a new office for the exchange, which will focus on its Asian customers, specifically crude consumers and banks.
The focus on Asian customers and banks reflects a shift away from the DME's previous objective of trying to get other Middle Eastern producers to price on its platform.
The exchange wants to increase liquidity of the Oman contract as well as improve price discovery across maturities to make the Oman benchmark more attractive, he said.
DME is not looking at adding more Middle Eastern producers, Fix said, adding that he did not rule out the possibility of getting more producers onboard at a later stage.
Over the long-term, the inclusion of more crudes is "inevitable," said Fix.
"But in the near term it's not something that I'll be bringing up or discussing in my immediate plans for 2013.” – Reuters