MIDDLE EAST LOOKS TO ENERGY FUTURES

Global Finance, Jul/Aug 2005 by Hawser, Anita

MIDDLE EAST/UNITED STATES

The Middle East has taken formative steps toward the establishment of the region's first energy futures exchange with the announcement of a joint venture between Dubai Holding and the New York Mercantile Exchange (NYMEX) estimated to be worth $10 million.

Commenting on NYMEX's first overseas joint venture, Mitchell Steinhause, NYMEX chairman, said that the new Dubai Mercantile Exchange (DME) would help bridge the time-zone gap between trading in Europe and Asia by creating energy futures products that addressed the growing needs of the regional market. "The contracts traded on DME will be tailored to the needs of the marketplace and may include physical delivery alternatives that represent the physical trade flows," commented James Newsome, president of NYMEX.

Dubai Holding will reportedly make the bulk of the cash investment required to establish the DME, while NYMEX's expertise in compliance, marketing, research and IT will underpin the development of the new exchange's trading platform. Trades executed on the DME, which is expected to open for business early next year, will also be cleared through NYMEX's clearinghouse in New York.

The DME's platform is intended to provide price transparency for sour crude and fuel oil trades. Mohammed Al Gergawi, CEO of Dubai Holding, said its priority now was to build on the agreement with NYMEX by developing "a platform for managing risk which reflects the increased financial sophistication of the region's capital markets." He said DME would build on Dubai's reputation as a major financial and trading hub.

In a separate development, the Dubai International Financial Exchange, which aims to become the main exchange between Western Europe and East Asia targeting issuers in the UAE, Gulf Cooperation Council states and the Middle East, as well as Africa, Turkey and Central Asia, is scheduled to commence operations on September 26. Gergawi said that Dubai had played an integral role in trading commodities and that the DME "would serve the greater need of the Middle East energy markets." -Anita Hawser