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Like ‘Champagne’, What is Murban crude oil?

This week, Bloomberg announced the launch of the new Bloomberg Commodity Murban Crude Oil Index, which aims to track the performance of futures contracts for Murban Crude Oil.

We understand what this is about:

Murban crude oil is a high-quality, light, and sweet crude oil that is extracted from the Murban oil field in Abu Dhabi, United Arab Emirates. 

The term "light" refers to its low density, and "sweet" indicates its low sulfur content, making it more desirable because it's easier and less costly to refine compared to heavier, sour crudes.

Is particularly well-suited for the production of high-value products like gasoline, diesel, and jet fuel. 

Its characteristics, including its low sulfur content and high API gravity, make it a preferred choice for refineries looking to minimize environmental impact while producing high-quality refined products.

The Murban oil field, where this type of crude is produced, is one of the largest and most important oil fields in Abu Dhabi and is operated by the Abu Dhabi National Oil Company (ADNOC). 

The crude oil from this field plays a significant role in the global oil market and is exported to various countries around the world.

What is Murban crude oil?
What is Murban crude oil?

What is the Bloomberg Commodity Murban Crude Oil Index?

Think of it like a scoreboard that keeps track of how well Murban crude oil is doing in the market. Just like you keep scores in a game, this index keeps track of the performance of Murban crude oil futures. 

Futures are contracts to buy or sell something in the future at a price agreed upon today.

Why is this Index important?

Until now, people mainly looked at two types of crude oil to get a sense of how the oil market was doing: WTI (West Texas Intermediate) and Brent. 

These are like the most popular games that everyone watches. 

But in 2021, Murban crude oil futures started being traded, adding a new game to watch. This index, therefore, gives investors another way to understand and invest in the oil market, focusing on Murban crude oil.

What makes Murban crude oil futures special?

Murban crude oil comes from Abu Dhabi and is known for its quality. The futures for this oil are unique because they're physically delivered, which means the contract ends with the actual delivery of oil, not just a cash settlement. This can be more appealing for certain investors or companies that want the physical product.

Benefits of the Bloomberg Commodity Murban Crude Oil Index:

Diversification: It offers investors a new way to spread their risks. Instead of putting all their eggs in one basket (just WTI or Brent), they can now include Murban in their investments.

Geopolitical and regional insights: This index helps investors understand and react to political and economic changes in specific regions, especially those affecting the Middle East and the oil market.

What’s unique about this new index?

It's part of the bigger Bloomberg Commodity Index (BCOM), which has been around since 1998. BCOM is like a big umbrella that covers a wide range of commodities, not just oil. The Murban index under this big umbrella ensures that no single commodity (like oil) takes over, keeping investments balanced.

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