DME May be Benchmark for Pricing Aramco Oil

Saudi Arabia-based Aramco, the world's largest oil company, is closer to pricing its oil against the Dubai Mercantile Exchange (DME) benchmark, according to a top exchange official.

"I don't know whether it will happen soon, but it will definitely happen," DME Chief Executive Officer, Thomas M Leaver, said. "We had been talking to Saudi Aramco and other national oil companies before we were set up," he said. DME has also been holding talks with other national oil companies in the region to price their oil against the Oman contract. "DME has been able to provide fair value to Oman crude and that sets an example," he said. Leaver said that he is optimistic about Aramco moving on to price its oil against the DME benchmark. The onset of the credit crisis and the plummeting oil prices in 2008 served as a "catalyst" for DME to attract national oil companies to price their crude against the Oman contract.

Levaer said that the other factors such as migration to the Globex trading platform and the taking of equity stake by "strategic investors" also played a role in generating renewed interest in the exchange. Between August and October the last year seven investors that include Goldman Sachs took a collective equity stake up to 20% at the exchange. Volumes at the exchange surged in November 2008 after the Globex migration was announced. The volumes set a record of 6,484 contracts on 13 January 2009. About 2000 contracts, each comprising 1000 barrels of oil are being traded at the exchange on an average daily in 2009.

"We believe that if Saudi Aramco incorporates the DME price into its pricing methodology, other national oil companies in the region will follow," he said referring to the national oil companies of Abu Dhabi, Qatar and Kuwait.- Business 24/7