Abu Dhabi Addition of New Exchange-Traded Oil Slips to Next Year

Abu Dhabi is taking its time about allowing one of the emirate’s top crude grades to be traded on a regional exchange.

(Bloomberg) — Abu Dhabi is taking its time about allowing one of the emirate’s top crude grades to be traded on a regional exchange.

Traders had expected Abu Dhabi National Oil Co. to allow its Upper Zakum crude to be listed on the ICE Futures Abu Dhabi exchange by the middle of this year. They now don’t see that happening until mid-2024 at the earliest, according to traders who asked not to be identified discussing market developments.

People with knowledge of the state-run company’s approach said there is a sense that Upper Zakum might not be optimally priced right now relative to other regional crudes. In addition, the UAE’s need to adhere to OPEC oil supply cuts, and how that dovetails with an exchange-traded product, is also under consideration, they said.

Adnoc and the Intercontinental Exchange Inc. both declined to comment.

Abu Dhabi wants to establish its crudes as a regional benchmark for pricing by other Gulf producers. The emirate already lists Murban crude, its most plentiful grade, on the exchange. Adnoc is boosting production capacity by almost a quarter to 5 million barrels a day. 

At the same time, the country is preparing to host the UN’s annual climate conference later this year and is expanding production of renewables, nuclear power and natural gas.

Adding Upper Zakum to the crude exchange based in the emirate would potentially boost liquidity and give traders greater ability to hedge between different grades. Adnoc sees the exchange as a way to maximize profit by letting the market price the crude and because the grade’s positioning as a potential benchmark would boost demand to trade the barrels.

Officials in the United Arab Emirates are mindful that prices of other regional grades, especially Saudi Arabia’s, have been boosted by production cuts and want to avoid taking steps that might embed a perceived under valuation of the emirate’s barrels, the people said.

Adnoc will have to guarantee sufficient supply to the market to support trading and liquidity on the exchange. Meeting that commitment  is made more difficult because of the UAE’s role as a producer in Organization of Petroleum Exporting Countries.

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