The DME's Oman crude oil futures for August delivery was at $64.17 a barrel at 4:17 p.m. Singapore time, down from the opening trade of $64.70. The September contract was at $64.75.
The DME is competing with ICE's Dubai contract as a marker for as much as 12 million barrels a day of high-sulfur, or sour, crude oil exports to Asia. Atlanta-based ICE beat the DME to the punch by starting trading on May 21. The two groups are offering alternatives to global benchmark prices tied to low-sulfur grades West Texas Intermediate, traded on Nymex, and Brent, that changes hands on the ICE Futures exchange in London.
``It's quite good for the physical traders and I hope it will be successful,'' said Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures Ltd. in Tokyo. ``My feeling is that it's a little bit late, unfortunately.''
Mitsui will probably trade the Oman contract, said Emori.
The DME is offering three contracts. The first is a future entitling buyers to Oman oil on expiry. The other two are swaps, or bets on changes in price, based on the difference between Oman and benchmarks Brent and WTI.
`Physically Backed Contract'
ICE's sour contract is tied to the price of Dubai crude and is cash-settled without any physical oil changing hands. The exchange also offers similar swaps on the Dubai differential to Brent and WTI.
``What we find is a differentiator for us is that we have a physically backed contract,'' Ahmad Sharaf, chairman of the Dubai Mercantile Exchange, said from Dubai today. ``Every other attempt at this has been a cash-settled contract which the market has been telling us they really don't want.''
ICE's Middle East sour contract for August settlement was at $63.86 a barrel, down 16 cents, at 4:19 p.m. Singapore time. The open interest in the contract was 1,454. Open interest is the total number of futures that haven't been closed, liquidated or delivered.
Nymex failed to find support for a Middle East sour crude future it introduced in 2001. The Singapore Exchange started a contract with the Tokyo Commodity Exchange in 2002 that ended a year later.
Dubai, the United Arab Emirates' second-largest oil producer, agreed on May 30 to base its oil prices on futures trading in the Oman contract, the DME said.
Declining Production
Dubai, the current Middle East sour crude benchmark, has faced declining production that is limiting the number of cargoes traded to less than four a month, according to the DME Web site.
Dubai pumps about 100,000 barrels of oil a day, according to the DME. The emirate also has 4 billion barrels in reserves, according to the U.S. Energy Information Administration.
Oman pumped 247 million barrels of oil in the 11 months ended November 2006, a decline of 4.5 percent from 2005. That's about 739,200 barrels a day, down from an average of 774,400 barrels a year earlier, according to the Ministry of National Economy.
a 30 percent stake in the DME on May 28.
``The goal obviously is to establish the Oman contract as a regional benchmark,'' said Gary King, chief executive officer for the DME, ``But overall, the ultimate goal is to get the contract recognized as a global benchmark.''
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