Since the 1950s, the Middle East has established itself as the world’s most prolific oil producing region, typically accounting for a third of global production. The oil crises of 1973–74 and 1978–80 spurred growth in Middle Eastern oil production and began the shift in market control from multinational corporations to national oil companies within OPEC nations. However, the region still exported most of its oil in crude form and had limited refining capacity at that time. However, that has changed in recent years, with the Gulf region expanding its refining capacity by a third since 2017 to 10.5 million barrels per day as GCC countries look to capture more value from their fossil fuel resources. This has enabled the region to significantly increase its gasoline output to nearly 2.4 million bpd from 1.7 million bpd , and doubled its gasoline exports to 654,000 bpd.
The large increase in refining capacity has, however, created a pricing conundrum thanks to Middle East petroleum products now reaching a much wider market than ever. Historically, the Gulf region used values derived from the Singapore market to price its gasoline, adjusted for the cost of freight. This made sense when Singapore was the biggest buyer of gasoline from the lower Middle East. However, Singapore now buys just 7% of the region’s gasoline exports, with Pakistan, the U.S., Australia, the Red Sea, the East Coast of Africa now major buyers of Gulf petroleum products. This has forced Gulf states to adopt a new pricing mechanism designed to capture local market fundamentals. Dubbed “MEBOB”, the new pricing mechanism lines up with Europe’s EBOB and the United States’ RBOB. EBOB refers to the Argus Eurobob benchmark for gasoline prices, a key price assessment in the Northwest European gasoline market, used in supply contracts, financial products, and futures contracts. It acts as a benchmark for the economics of producing gasoline from crude oil, known as the “EBOB crack”. The price is published by Argus Media and is used by refiners, traders, logistics providers, analysts, and governments. Meanwhile, RBOB refers to Reformulated Blendstock for Oxygenate Blending, a gasoline blendstock traded as a futures contract on the CME Group’s NYMEX (New York Mercantile Exchange). It is the primary input for producing reformulated gasoline (RFG) when mixed with ethanol and is a key benchmark for investors to speculate on energy markets and the price of refined products.
Meanwhile, individual GCC countries are coming up with innovative ways to monetize their hydrocarbon resources. Four years ago, the United Arab Emirates opened trade in its Murban crude to compete with Brent and WTI crude. Abu Dhabi launched the Murban crude futures contract, a rival benchmark for trading Middle East crude. The contract is traded on the new ICE Futures Abu Dhabi (IFAD) oil exchange. IFAD partners include BP Plc (NYSE:BP), PetroChina (NYSE:PTR), Total (NYSE:TOT), Japan’s Eneos Holdings, Vitol, Inpex, Thailand’s PTT Plc and South Korea’s GS Caltex. Murban is a light sweet crude with a sulphur content of 0.78% and an API gravity of 39.9 degrees.
Murban crude is sent to Fujairah via pipeline, specifically the ADNOC (Abu Dhabi National Oil Company) pipeline that transports crude from the Habshan oil fields and the Jebel Dhanna storage depot to Fujairah, providing an export route outside the Strait of Hormuz. This pipeline, also known as the Abu Dhabi Crude Oil Pipeline (ADCOP), enables physical delivery of Murban crude for export. ADNOC is building a massive underground oil storage site in Fujairah—billed as the largest of its kind anywhere—with space for 42 million barrels spread across three caverns. The $1.2 billion project was handed to South Korea’s SK Engineering and Construction and was originally slated to come online in 2023, but the pandemic threw the schedule off course.
Trading in Murban futures has taken off in 2024, smashing records quarter after quarter. In Q2 alone, volumes hit 1.5 billion barrels, more than double the pace seen at the start of the year. June set fresh highs across the board, with an average of 31 million barrels changing hands daily and a single-day peak of 57,300 contracts, or 57.3 million barrels. The surge shows Murban is no longer a niche Gulf crude—it’s becoming a go-to benchmark with real global traction.
Murban crude has been trading at a premium to Brent, with the current price at $70.72 per barrel vs. $67.75 per barrel for Brent. Only three OPEC grades are trading higher, including Saudi Arabia’s Arab Light ($72.33 per barrel), Nigeria’s Bonny Light ($78.62/barrel), and Angola’s Girassol ($79.56/barrel).
Credit: Oilprice.com
