DME sees Dubai open interest overtake Oman alongside higher trading volume

Singapore — A spike in trading volumes in Dubai crude futures on the Dubai Mercantile Exchange this month has propelled its open interest higher than the exchange's flagship Oman contract.

Daily trading volume for Dubai futures contracts on the DME surged over the period, with 8,900 lots traded so far in January up from 1,370 in December and 938 in November.

Total open interest for Dubai futures surpassed Oman for the first time this month on January 14, when Dubai open interest, at 8,980 lots, was more than double Oman.

A spokesman for DME attributed the higher open interest to sharply higher volumes for Dubai contract this month. "DME is a cost efficient venue in terms of fees and margin efficiencies against DME Oman and CME products such as WTI and NYMEX Brent," the spokesman said.

Total open interest – a key barometer for a contract's liquidity and use in risk management -- stood at a total 37,651 lots as of January 28, data from the exchange showed.

While Oman open interest climbed back higher, Dubai's proportion still accounted for 28% of open interest on the exchange. In comparison, over 2019, open interest for the Dubai futures contract traded on the DME ranged from 6%-18% of total open interest at the month-end.

Meanwhile, open interest for the DME's Brent/Dubai futures contract stood at 15,605 lots, or 41% of total open interest on Tuesday. The same contract comprised 51%-68% of total open interest at the end of the month between January and December 2019.

Dubai crude futures and the Brent/Dubai spread are commonly used by market participants to manage their exposure to Middle East crude, including Oman export blend.

Open interest for the Oman futures accounted for 30% as of Tuesday. Open interest on the DME Oman contract peaks at the end of the month as much of the positions are taken to delivery of physical cargoes. In 2019, Oman futures accounted for 32%-44% of total open interest on the exchange at the end of the month.

Much of the open interest in the DME Oman lies in the front-month contract, commonly used to procure physical barrels of Oman crude. The contract's limited role in risk management means its sees little to no open interest in deferred month contracts despite sizable daily volumes.

Dubai futures and Brent/Dubai futures on DME typically see open interest going as far out as 14 months, as market participants convert their exposure to either Dubai or Brent contracts using the two instruments.

Some Middle East crude oil assessments published by S&P Global Platts compete with DME Oman in the Asian oil benchmark space.