The Abu Dhabi National Oil Company (ADNOC), which pumps most of the crude oil of OPEC’s third-largest producer, the UAE, plans to launch its own oil benchmark for the region, possibly as soon as November, as part of an effort to boost its regional influence and bolster its oil trading business, Reuters reported on Tuesday, quoting four sources with knowledge of the plans.
The oil benchmark idea is part of an ADNOC plan to overhaul its oil trading business and gain more pricing influence for its oil sales. The company hasn’t finalized the plans yet, but once it does, these plans would need approval from the UAE’s authorities, according to Reuters’ sources.
ADNOC is weighing the possibility of dropping restrictions on destinations for all its crude oil, instead allowing it to trade freely on the market, the sources say.
Destination-free resale of crude oil is a main prerequisite for a crude grade to be a benchmark.
ADNOC is considering making its Murban grade a regional benchmark, and possibly, a global oil benchmark like WTI Crude and Brent Crude, Reuters’ sources added.
“The fact that ADNOC wants to turn Murban into a destination-free grade shows they are serious about making it a benchmark,” one of those source told Reuters.
The UAE firm is reportedly discussing these plans with several exchanges, including the Chicago Mercantile Exchange (CME) and the Intercontinental Exchange (ICE), according to three of the sources. Related: Gulf Of Mexico Oil Production Restarts After Tropical Storm
Earlier this year, ADNOC and South Korea’s SK Engineering and Construction Co. Ltd (SKEC) signed an agreement to build the world’s single largest underground oil storage facility that would boost ADNOC’s flexibility to export crude oil and support its push into oil trading.
Shortly before that, ADNOC signed strategic partnership agreements with Italy’s Eni and Austria’s OMV, under which the European oil majors bought minority stakes in ADNOC Refining and the three companies agreed to create a trading joint venture.
ADNOC and other national oil companies (NOCs) are only beginning to venture into oil trading, but they have one huge advantage over independent oil traders, and that is the fact that NOCs own their oil, global energy market expert Cyril Widdershoven wrote in May.
By Tsvetana Paraskova for Oilprice.com
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