DME volumes soar

The Dubai Mercantile Exchange sees record volumes in 2010 as oil demand soars and the exchange establishes itself globally.

Volumes rose dramatically last year on the Dubai Mercantile Exchange (DME), the UAE's oil futures market, as a cold snap in Europe and growing faith in the global recovery boosted global oil demand.

An average of 12.1 million barrels were delivered through the exchange every month last year, an increase of 34.6 per cent from the year before, the exchange said in its annual report. More than 140 million barrels of crude were delivered for the year.

Analysts said the DME was finding its feet after its establishment in 2007 as a local competitor to IntercontinentalExchange (ICE) and the New York Mercantile Exchange (NYMEX), which trade futures on Brent and West Texas Intermediate crude (WTI), respectively.

"It's starting to get established and trusted," said Samuel Ciszuk, a Middle East energy analyst at IHS Global Insight. "Increasingly the region is looking to the DME."

Kuwait and Saudi Arabia have shown an interest in adopting the DME's flagship Oman crude futures contract as a benchmark.

"Of course, there has been a global rebound, but I think there's some kind of capture [of market share] going on," he said. Bottlenecks at the WTI Cushing facility in Oklahoma were reducing its attractiveness as a benchmark, he said.

September saw a peak in volumes of delivery for the DME, with a record high of 15.1 million barrels delivered. Transactions for Oman Crude Oil Futures Contract, the benchmark for Dubai and Oman crude, also increased, with an average of 2,898 lots traded daily last year, an increase of 35 per cent on the previous year.

The exchange said "open interest", the number of futures held but not delivered, also reached a record high. It did not specify the number of contracts traded.

"During 2010 the DME maintained and consolidated its position as the most effective benchmark for crude oil in the Middle East and Asia," said Ahmad Sharaf, the DME chairman.

"At a time when Asian oil markets continue to grow rapidly, overtaking consumption levels in Europe and North America, we are confident that both the importance of the DME Oman Contract, and the role that it can play within the global market, will continue to grow still further."

However, one trader at a UAE bank, who asked not to be named, was less impressed by the DME figures. "The volume isn't even considered that much. They're picking up, but you can't compare it to NYMEX or ICE," he said.

But he added that despite the low total DME volumes compared with the bigger exchanges, the increase in volumes could well be sustained this year. "They'll pick up in the next couple of months given that, for locally based companies, it's very convenient, given trading hours," he said.