UAE oil exports to Europe have begun to witness an increase in the recent period, with the decline in supplies from Russia, amid the efforts of the countries of the old continent to diversify their imports.
A number of experts expected that oil exports from the UAE to Europe would increase in the coming months, replacing Russian flows that decreased in the wake of Moscow’s invasion of Ukraine in 2022.
Speakers said – at the Middle East Oil and Gas Conference, which kicked off in Dubai yesterday, Monday, May 22 (2023) – that UAE oil exports to Europe may triple, to reach more than 300,000 barrels per day in July. , from an average of 100 thousand barrels per day in the first quarter of this year.
Murban ore
Thomas Wimel, Head of Trade and Shipping at Total Energy, said that Abu Dhabi’s decision to launch the Murban futures contract in 2021 helped create opportunities to balance flows to Europe, which supported demand for ADNOC’s main light sour crude.
“One of the main reasons that could help the growth of UAE oil exports to Europe is Abu Dhabi’s choice of market price mechanism to sell its crude oil,” Wimel added, according to S&P Global Platts.
And the Abu Dhabi Intercontinental Futures Exchange had started trading Murban crude contracts on March 29, 2021, which is the benchmark oil for Abu Dhabi’s production of low-carbon oil, as about 1.5 billion barrels of it were traded in the first year of its launch, according to the data seen by the platform. specialized energy.
Murban crude futures contracts are supported by 9 international energy companies, including British Oil Company BP, GS Caltex, Inpex, Ineos, PetroChina, PTT, Shell, Total Energy and Vitol, as they joined as founding partners on the Abu Dhabi Intercontinental Futures Exchange.
Murban Crude Pricing
Crude futures had a facilitating role, Wemel said, as the liquidity of the contracts grew with the increase in exports to Europe.
He added, “With the emergence of more UAE oil exports to Europe, sales contracts on the Abu Dhabi Intercontinental Exchange will be a key factor in securing new outlets for crude oil production in Abu Dhabi.”
The official selling price of Murban crude depends on the settlement of future contracts, which will be delivered for the next two months, as ADNOC’s Upper Zakum, Das and MLulu crudes are priced differently from Murban.
For his part, Gary King, President of the International Fund for Agricultural Development, said that the average daily volume of Murban futures contracts is more than 10,000 contracts, with open interest at record levels of 450,000 contracts.
“We will likely see more and more Murban crude going to Europe, depending on the economy,” King added, S&P Global Platts reported.
Currently, Murban crude is destined mostly for China, Thailand, India and South Korea, which are the largest importers of UAE oil.
Middle East oil
The official at Total Energy said that the pricing mechanism for oil from other producers in the Middle East also affected export flows to Europe.
He pointed out that producers from the Middle East have limited their supplies, and the pricing policy of Murban crude – not linked to official selling prices – has given some flexibility to the flows of UAE oil exports to Europe.
He explained that the official oil prices announced by companies to Europe were not particularly attractive, prompting European refiners to search for alternatives.
The S&P Global report believes that producers in the Middle East need an attractive pricing mechanism to maintain their share in the Asian market, which is witnessing increasing flows of Russian and American oil.
“With the competition between Russian and US exports, it may be necessary for producers in the Middle East to find ways to get an attractive pricing mechanism, in order to ultimately maintain their market share when they ramp up production again,” Wimel said.
fuel exports to Europe
However, exports of petroleum products from the Middle East to Europe fare better than crude oil inflows, as they are not linked to official selling prices and benefit from the expansion of refineries in the region.
“In the case of Europe and diesel, the Middle East has succeeded in increasing its shipments, filling part of the gap left by Russia, with Asia and the United States helping to fill the remaining gap,” Wimel said.
“The trading arms of Middle Eastern companies have been able to develop a lively spot trade, taking advantage of the arbitrage volatility between all the different destinations,” he added.
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