PC: Reuters
Abu Dhabi National Oil Company, ADNOC, has struck its first trades using S&P Global Platts’ pricing mechanism for the Middle East benchmark Dubai crude oil, making an important turning point in the oil trading game in this region. According to traders, ADNOC bought two partials from BP and Trafigura with a price tag of $70.25 per barrel. The trades were within the 42 partials traded during the Platts Market on Close process.
Each partial equals 25,000 barrels of crude oil. Market observers pointed out that it is uncommon for Middle Eastern oil producers to take an active part in price-setting trades for crude that originated from their own area.If ADNOC where to get involved with the MOC process, this could signal either a significant change in their trading strategies or a genuine attempt to take a more leading role in the pricing mechanisms of crude benchmarks in the region. The Dubai crude benchmark assessed by S&P Global Platts is, therefore, eminently significant to the establishment of a pricing framework for Middle Eastern crude exports, especially with those directed toward Asia.
Buyers and sellers offer their bids and offers during an announced time, and deals made historically participated in forming the basic benchmark price. Numerous national oil companies, including those from the UAE and neighboring Gulf countries, view Dubai crude as an essential pricing point of reference. Middle East crude oils continue to dominate global trade accounts, producing around 17 million barrels daily last year, making around 42% out of the total global crude shipments, according to Kpler, an industry analytics firm. All price fluctuations and trades of Middle Eastern crude are viewed with great fascination by market players since the Middle Eastern region is a dominant player to reckon with in energy supply globally. So far, both ADNOC and S&P Global Platts have declined to meaningfully comment on these deals, but their silence does raise speculation about what ADNOC might have in terms of future trading or engagement with international pricing.
Dubai remains essentially intact as the financial and trading nucleus of the Middle East, retaining a central position in the regional oil markets on account of its infrastructure and geographic advantages, thus making it a prime center for crude trading and storage. Dubai has effectively promoted itself as a global energy hub, some big oil traders, and financial institutions have come in to participate in the oil and gas sector.
The fact that ADNOC is participating in this process of Platts pricing allows another dimension to the significance of Dubai concerning the trade of oil on a global scale, thus reaffirming its position as hub for energy pricing and transactions. National oil companies’ participation in price-setting mechanisms in oil market dynamics could very well alter the trends in pricing and trading practices. ADNOC’s involvement with the Platts MOC process may imply that within its ranks, Middle Eastern producers are taking on a more active role in influencing regional crude benchmarks. Undoubtedly, with the ever-changing geopolitical and economic landscapes, Dubai would be even more cemented as a trading centre in the near future.
