Argus launches differentials for Middle East crudes against DME Oman futures

Global energy price reporting agency (PRA) Argus has become the first PRA to publish prices for selected Middle East crude grades relative to the Dubai Mercantile Exchange’s (DME) Oman crude futures contract. DME Oman is gaining traction as a benchmark across Asia following the move by Saudi Aramco to incorporate its prices into its sales formula.

Argus began publishing daily differentials to the DME Oman settlement price for Dubai, Murban, Qatar Marine, Qatar Land, Al-Shaheen and Banoco Arab Medium crudes on 13 July. Differentials for Basrah Light, Basrah Heavy, Das and Upper Zakum grades will follow later this year.

DME Oman futures offer the most liquid pricing signal for physical crude in the Mideast Gulf. Saudi Aramco will use DME Oman as part of the formula to price crude sales to Asia-Pacific in October — replacing the Oman price published by PRA Platts — setting an important precedent for the use of DME Oman as the underlying marker for regional term and spot crude deals.

“Argus recognises the importance of the DME Oman contract to Mideast Gulf pricing, and its use as a key reference by market participants,” Argus chairman and chief executive Adrian Binks said. “We are pleased to bring transparency to the value of other crude streams from the region in relation to the DME price.”

The Omani and Dubai governments adopted DME Oman futures to calculate official selling prices for Oman and Dubai crude a decade ago and Argus adopted the exchange’s settlement price as the basis for the daily Argus spot price for Oman shortly after. Asia-Pacific refiners that measure their performance and hedge their output against the Dubai price may increasingly use DME Oman as a parallel hedging tool — requiring increased visibility of the relative value of related Middle East crude grades they buy.

Argus will initially calculate the differentials by taking the outright value of each individual grade based on their prevailing pricing mechanisms — whether relative to an official selling price or to the Dubai benchmark — and comparing it with the DME Oman futures front-month settlement price. The differentials are published in the daily Argus Crude report.

 

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