In March 2021, the Intercontinental Exchange (ICE) Futures Abu Dhabi (IFAD) exchange introduced a new crude oil futures contract. The new futures are based on Murban crude grade and delivered to the UAE’s Fujairah hub. The new contract will compete with other regional contracts, especially the Dubai Mercantile Exchange (DME) Oman crude oil contract. DME Oman had low trading volumes compared to Brent and US WTI. Brent has served as the international benchmark, while US WTI reflects crude oil produced mostly in Texas.
The IFAD Murban contract has traded at a lower price relative to Brent but higher than US WTI. Lighter, sweeter grades often trade higher than heavier, sour grades as they yield more high-value products. Murban, with an API degree of 40, is lighter than Brent, WTI, and DME Oman. However, it contains higher sulfur, making it sourer, which likely contributes to it being at lower prices relative to Brent.
Point of delivery also affects crude oil benchmark pricing. US WTI is almost always cheaper than Brent to be competitive because it is delivered to landlocked Cushing, Oklahoma, where buyers must pay to transport the crude to a coastal location if they plan to export it. Meanwhile, Brent and Murban do not require this extra transportation cost. Murban’s physical delivery point is Fujairah, the largest oil storage and shipping hub in the Middle East.
In addition, state-owned Abu Dhabi National Oil Company (ADNOC) has committed to increasing Murban production to 2.5 million bpd by 2030. An interrupted production makes Murban suitable to serve as a price benchmark.
