DMCC plans gasoline futures contract for trade on DGCX

The gasoline contract extends DMCC's energy operations, which currently comprises the fuel oil futures contract, set to be launched later this year.

According to Dr Tilak K. Doshi, Executive Director for Energy at DMCC, the rationale for gasoline as the next futures contract on the DGCX is compelling. "Gasoline pricing practices in the Middle East are in need of serious reform, having long ceased to adequately serve the region's need for an efficient and transparent pricing system."

"Currently, pricing for gasoline is based on a mix of pricing references which include a freight-adjusted Mediterranean basis, Singapore-basis, and a regional naphtha quote which itself is a "net-backed" price from the Far East," said Dr. Doshi. "In an era of ever higher and volatile prices, this contract would provide an efficient tool to hedge price risk for both consumers and refiners in the "East of Suez" region," he added.

Gasoline is the only hydrocarbon fuel in which the Middle East as a region is net short, with Iran rating as one of the world's largest importers of the product.

DMCC's proposed gasoline futures contracts reinforces Dubai's position as a natural hub for the gasoline trade which encompasses the Gulf, Europe and the Mediterranean, East Africa and Asia. The Emirate has already attracted significant infrastructural investments in gasoline storage and blending activity both in Jebel Ali and Fujairah.

Framroze Pochara, Chief Executive of DGCX said,

"We constantly strive to introduce on the DGCX platform new products which are of use to the industry. This contract will provide an efficient tool to hedge price risk for both the consumers and the refiners. An efficient price discovery mechanism for gasoline in the region would further consolidate the storage and blending centres of Jebel Ali and Fujairah in their role of linking the exports of the Mediterranean and Asia to the requirements of the Middle East and Africa."

The DMCC will shortly begin the process of constituting an advisory committee made of industry representatives including gasoline producers, traders, integrated oil companies, and key consumer interests, to set a unified gasoline price reference.

Currently, the physical trade in gasoline already involves a wide number of industry participants, ranging from national oil companies to trading houses and major oil companies. Key players in the regional and global gasoline markets such as BP, Emarat, ENOC, Shell, Trafigura and Vitol are already active players in Dubai's role as the hub of gasoline trade.