ADNOC shifts crude pricing benchmark to Dubai

Abu Dhabi National Oil Company will change the benchmark used to determine official selling prices for all its crude grades from November 1, replacing Murban futures with prompt-month Platts Dubai pricing.
The overhaul will cover Murban, Das, Umm Lulu and Upper Zakum crude. ADNOC will announce a premium or discount for each grade against Dubai quotes during the month before the cargo is loaded, bringing the pricing period closer to physical delivery.

“The new pricing mechanism reinforces ADNOC’s commitment to pricing transparency for its growing customer and investor base,” the company said.

The change reverses a central element of the pricing system introduced alongside the launch of Murban crude futures on ICE Futures Abu Dhabi in March 2021. Under that framework, Murban’s official selling price was linked to the settlement of the physically delivered futures contract, while the other Abu Dhabi grades were priced at differentials to Murban.

Murban futures were designed to establish the light, low-sulphur crude as a globally recognised benchmark and strengthen Abu Dhabi’s role in international commodity trading. The contract also supported forward price discovery and gave refiners, producers and financial investors another instrument for managing exposure to Middle East crude.

The system, however, created a timing gap because the relevant futures settlement could determine prices about two months before cargo loading. That approach became more difficult for buyers and sellers during periods of sharp market volatility, when physical crude values could move substantially between the pricing and delivery periods.

Using prompt-month Platts Dubai will reduce that mismatch. The benchmark reflects trading in Middle East sour crude destined largely for Asia and is widely used to price Gulf oil exports. It is built around physical market activity and assessed through bids, offers and transactions during a defined trading process.

ADNOC’s differentials will allow the company to reflect variations in crude quality, refining value, freight conditions and regional demand. Murban usually commands a stronger valuation because of its relatively light density and low sulphur content, while Upper Zakum is heavier and more sulphurous. Das and Umm Lulu occupy different positions within Abu Dhabi’s export slate.

The switch also brings ADNOC’s pricing arrangements closer to the practices followed by several other Gulf producers, which sell crude to Asian customers using monthly differentials against Dubai and Oman benchmarks. Asia remains the main destination for Abu Dhabi oil, with refiners in China, Japan, South Korea, India and Southeast Asia forming the core customer base.

Consultations over a possible change had been under way with customers since June. ADNOC also conducted a series of spot tenders using Dubai-related pricing, providing market participants with an indication of how the revised mechanism could operate.

The company sold cargoes of Murban, Upper Zakum, Umm Lulu and Das through those tenders for loading across several months. Strong competition emerged for some grades as Asian refiners sought secure supplies amid disruption to established shipping routes and heightened volatility in Middle East crude markets.

Moving the pricing reference does not end trading in Murban futures. ICE Futures Abu Dhabi plans to maintain active Murban contracts, allowing market participants to continue using them for hedging and physical delivery. Trading in inactive contract months is expected to be suspended as the exchange adjusts to the new commercial structure.

The decision nevertheless raises questions about the future influence of Murban as a standalone international benchmark. Futures contracts generally require sustained participation from producers, refiners, commodity traders and financial institutions to generate the liquidity needed for reliable price discovery.

Murban retains advantages as a deliverable crude because it is produced in substantial volumes and exported through established infrastructure. Abu Dhabi can also move supplies through the Habshan-Fujairah pipeline to the Gulf of Oman, reducing reliance on tanker movements through the Strait of Hormuz.

ADNOC said the pricing revision would not materially affect financial instruments issued through its global medium-term note or sukuk programmes. It also said contractual delivery commitments would continue to be met.