What Next for Asian Benchmarks? – A Footnote

Since October 2018 Saudi Aramco has used the DME Oman daily settlement price in its pricing formula for Asian customers. The DME Oman futures contract settles daily, based on a weighted average of trades between 16.25 and 16.30 Singapore time (often referred to as a ‘window’). In line with the usual timing of Asian oil purchases, this contract trades two months before the actual month of loading. Therefore, during November 2018, for example, the front month contract is January 2019. The Oman official selling price (OSP) is set using the monthly average of the DME Oman daily settlements. Physical Oman is generally traded on the basis of this OSP. On most days the DME Oman settlement is based on a relatively large volume of trades. However, this volume tends to fall rapidly as the last day of trading approaches. In March 2016 DME introduced a new methodology designed to boost liquidity on the last day of the contract (‘on expiry’). Nevertheless, as the price spike at the end of September 2018 shows, the problem persists. While this was an extreme event, it still needs to be addressed. The most likely solution, as presented here, is the introduction of an alternative delivery mechanism.


By: Adi Imsirovic

Latest Tweets from @OxfordEnergy

  • New OIES paper looks at LNG projects vying for FID in 2019-20, reviews 5 areas, costs and competitiveness, and the… https://t.co/pz3UDcUcQU

    March 20th

  • Outlook for Competitive LNG Supply https://t.co/qmG43CklMw

    March 20th

  • OIES’s @thierry_bros to explain how LNG supply and storage could mitigate the risk of no transit contract in Ukrain… https://t.co/Wl5aj4bEM8

    March 20th

Sign up for our Newsletter

Register your email address here and we will send you notification of new publications, comment, articles etc. automatically.