Dubai Gold and Commodities Exchange (DGCX) will usher in its first energy-related futures contract in the fourth quarter, when it debuts a fuel oil contract on October 30, officials said yesterday.
The exchange said it would begin trading a Fujairah 380 CST high sulphur fuel oil futures contract. Fuel oil is a heavy form of petroleum used to power ship engines or power stations.
"The proposed futures contract will facilitate price discovery nearer home for a commodity which plays such an important role in the region," the DGCX said.
It explained that bunkering the process of supplying a ship with fuel accounts for 80 per cent of total fuel oil consumption in the UAE. As the UAE rapidly becomes a central shipping hub between Asia and Western Europe, the demand for such a contract will heighten, officials said.
"The Port of Fujairah has been commonly ranked as the second largest bunkering facility in the world," the DGCX said, noting that the port supplies 12 million metric tonnes of bunker fuel annually.
The fourth quarter will also see the launch of an Oman sour crude oil futures contract on the Dubai Mercantile Exchange (DME), a rival commodity exchange being established by Tatweer, a Dubai Holding subsidiary, and the New York Mercantile Exchange.
"The fuel oil contract is consistent with the pattern of Dubai seeking to become involved in as many commodities trading areas as they can. They are looking at crude oil and why not other energy products too, which will give the market more depth," said David Butter, a senior economist and Middle East analyst for the London-based Economist Intelligence Unit.
Butter said globally, fuel oil is not traded as much as it used to be, but it could fill a need in the region given the port traffic passing through the Gulf.
The fuel oil contract which will be traded in lots of 100 metric tonnes of 4.5 per cent sulphur, 380 centistoke fuel oil will debut with six consecutive forward month contracts, beginning with December 2006.
"We hope to bring more such products to the market and provide an efficient platform for managing the price risk to the participants exposed to the respective class of commodities," said DGCX Chairman Colin Griffith.
The DGCX launched last November with a paper gold contract, and has since added silver and currency futures to its electronic trading platform.
A gasoline contract is also in the offing for the DGCX, likely in early 2007.
Meanwhile, as Emirates Today reported last week, the exchange could also launch a liquefied natural gas (LNG) futures contract in the future, following the construction of a $1 billion (Dh3.67bn) LNG storage facility.
The DME, meanwhile, plans to unveil a jet fuel contract in the first half of next year.
By Daliah Merzaban
© Emirates Today 2006
