The battle of the sour futures contracts

Journal article

The Intercontinental Exchange (ICE) and the New York Mercantile Exchange (NYMEX) with its partner the Dubai Mercantile Exchange (DME) have been fiercely competing to create a viable and liquid sour oil futures contract that could serve as a pricing benchmark and as a mechanism for improved risk management. In part, this fierce competition reflects a battle between two very different approaches to oil trading and pricing. While ICE’s Middle East sour crude futures contract (launched on 21 May) is a purely financial instrument settled in cash against a Platts Dubai assessment, DME’s Oman futures contract (launched on 1 June) allows settlement against physical delivery of Oman crude oil. In the first month of trading, DME announced that a total of 4000 Oman futures contracts would be going for physical delivery in August. This is equivalent to 4 million barrels comprising a little less than 18 percent of Oman’s monthly crude oil production.

Authors: Fattouh, B

• Publication status: Published
• Peer review status: Peer reviewed
• Publisher: Oxford Institute for Energy Studies
• Journal: Oxford Energy Forum
• Volume: September 2007
• Issue: 70
• Pages: 15-16
• Publication date: 2007-09-01
• Edition: Publisher's version
• ISSN: 0959-7727
• Language: English
• Keywords: OIES