ADNOC wants its flagship crude as global benchmark

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ADNOC chief Sultan Ahmed Al-Jaber speaks during the opening ceremony of the Abu Dhabi International Petroleum Exhibition and Conference on Monday. (AFP)
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The emirate last week approved the launch of a new pricing mechanism for Murban crude as part of a major transformation strategy. (Reuters)
Updated 13 November 2019

ADNOC wants its flagship crude as global benchmark

  • Abu Dhabi oil giant’s ambitious call comes amid falling Brent volumes and new UAE exchange plan

ABU DHABI: Abu Dhabi National Oil Co. (ADNOC) is aiming to have its Murban futures contract eventually replace North Sea benchmark Brent whose volumes are declining, an ADNOC executive said on Tuesday.

Intercontinental Exchange Inc. plans to launch a new exchange in the UAE, ICE Futures Abu Dhabi (IFAD), in the first half of 2020 to host ADNOC’s flagship Murban crude grade.

“We want to give the industry Murban as a replacement for Brent crude futures,” Philippe Khoury, head of trading at ADNOC group, told an energy conference in the UAE capital Abu Dhabi.

“We still have to demonstrate that over time the community can trust the crude as a benchmark,” he added.

Oil majors BP, Total, Inpex, Vitol , Shell, Petrochina, Korea’s GS Caltex, Japan’s JXTG and Thailand’s PTT have agreed to become partners in the new exchange.

Vitol CEO Russel Hardy said that it will take time to build liquidity on the new exchange, and that Brent, a basket of different crude qualities, and US West Texas Intermediate (WTI) were very established.

“There is a great deal of different constituents playing in those markets. These things will take time to build up on the exchange here,” he said at the same panel discussion.

“It is right to have that level of ambition but it will take some time to build that level of liquidity,” he said of ADNOC’s plans for Murban.

The new contract will create an alternative benchmark to the most commonly used Middle East standard, the Dubai/Oman benchmark operated by the Dubai Mercantile Exchange (DME) and traded on CME’s electronic platform.

Abu Dhabi’s Supreme Petroleum Council last week approved the launch of a new pricing mechanism for Murban crude as part of ADNOC’s broader transformation strategy. It authorized the state energy firm to remove destination restrictions on Murban sales.

ADNOC plans to implement new Murban forward pricing between the second quarter and third quarter of 2020.

UAE Energy Minister Suhail Al-Mazrouei said earlier on Tuesday that he saw no conflict between his country’s compliance with OPEC output cuts and plans to list Murban.

He said the UAE remained committed to cuts agreed by the Organization of the Petroleum Exporting Countries, plus allies led by Russia. These countries have since January implemented a deal to cut output by 1.2 million barrels per day (bpd) which lasts until March 2020, in an attempt to boost prices.

“I don’t think there is a conflict in floating Murban with the fact that UAE is going to comply with whatever we agree to with OPEC. I am not worried about that,” Mazrouei said.

Murban light crude output is around 1.6-1.7 million barrels per day. The UAE has traditionally sold oil directly to end-users, mainly in Asia, based on retroactive pricing rather than forward pricing used by Saudi Arabia, Kuwait and Iraq.

The UAE, the third-largest OPEC producer behind Saudi Arabia and Iraq, pumps around 3 million bpd, produced mostly by ADNOC. 


Mexico objects to labor enforcement provision in North American trade deal

Updated 15 December 2019

Mexico objects to labor enforcement provision in North American trade deal

  • Mexico produced more stringent rules on labor rights aimed at reducing Mexico’s low-wage advantage
  • US House of Representatives proposes the designation of up to five US experts who would monitor compliance with local labor reform in Mexico

MEXICO CITY: Mexico’s deputy foreign minister, Jesus Seade, said on Saturday he sent a letter to the top US trade official expressing surprise and concern over a labor enforcement provision proposed by a US congressional committee in the new North American trade deal.
Top officials from Canada, Mexico and the United States on Tuesday signed a fresh overhaul of a quarter-century-old deal, aiming to improve enforcement of worker rights and hold down prices for biologic drugs by eliminating a patent provision.
How labor disputes are handled in the new United States-Mexico-Canada Agreement (USMCA) trade deal was one of the last sticking points in the negotiations between the three countries to overhaul the agreement.
Intense negotiations over the past week among US Democrats, the administration of Republican US President Donald Trump, and Mexico produced more stringent rules on labor rights aimed at reducing Mexico’s low-wage advantage.
However, an annex for the implementation of the treaty that was presented on Friday in the US House of Representatives proposes the designation of up to five US experts who would monitor compliance with local labor reform in Mexico.
“This provision, the result of political decisions by Congress and the Administration in the United States, was not, for obvious reasons, consulted with Mexico,” Seade wrote in the letter. “And, of course, we disagree.”
USMCA was signed more than a year ago to replace the North American Free Trade Agreement (NAFTA), but Democrats controlling the US House of Representatives insisted on major changes to labor and environmental enforcement before voting.
The letter, released on Saturday, is dated Friday and addressed to US Trade Representative Robert Lighthizer. Seade said he would travel to Washington on Sunday to raise the issues directly with Lighthizer and lawmakers.
“Unlike the rest of the provisions that are clearly within the internal scope of the United States, the provision referred to does have effects with respect to our country and therefore, should have been consulted,” Seade wrote.
Both Canada and the US House Ways and Means Committee said the deal included a mechanism for verification of compliance with union rights at the factory level in Mexico by independent labor experts.
Some Mexican business groups bemoaned a lack of clarity and conflicting information on how the rules would actually be enforced under the deal, the first text of which became public only on Wednesday.