Among global oil traders, the UAE’s exit from Opec has triggered a debate less about the future of the producers’ alliance – though there is plenty of that – than about something even more fundamental: who gets to price the world’s crude.
For nearly 40 years, the architecture of oil pricing has been remarkably stable. Brent, a North Sea blend, is the dominant global benchmark. WTI (West Texas Intermediate) prices US barrels. And Dubai/Oman, an assessment of physical Middle Eastern grades, anchors just about everything heading east to Asia, where the bulk of the world’s growing crude demand now lives.
Under this traditional model, major exporters have historically preferred control over open market transparency. Saudi Arabia, for instance, does not trade its oil on an exchange, selling instead under long-term contracts at a monthly official selling price (OSP) set at a premium or discount to the Dubai/Oman benchmark.
The buyer, in effect, takes what the producer asks. This has long suited producers, allowing them to manage supply through quotas without surrendering pricing power to financial market “speculators”. Buyers grumbled but had little alternative.
Some traders openly talk about Brent facing irrelevance by the middle of the next decade
Then, in 2021, Abu Dhabi did something quietly subversive. It abandoned the OSP regime and launched a futures contract for Murban, the UAE’s flagship light, low-sulphur crude, on the new ICE Futures Abu Dhabi exchange. At launch, claims that the contract could one day rival Brent were widely dismissed as overreach.
Today, with the UAE outside the Organization of the Petroleum Exporting Countries and an expanded Fujairah infrastructure network poised to push export capacity to more than 4 million barrels a day, completely bypassing the Strait of Hormuz, that claim suddenly looks more plausible.
Every barrel of Murban now clears automatically on the exchange. There are no monthly price negotiations, no unsold cargoes and no awkward nominations (the complex scheduling of tanker slots). The market sets the price, and the buyer knows exactly what it is paying.
Compared to the rigid OSP system, it is elegant, self-balancing and increasingly the natural reference point for regional grades heading to Asia.
This raises a compelling question being posed from Houston to Singapore: how would Saudi Arabia respond?
The kingdom’s market instincts are traditionally cautious; Aramco took more than a decade to evolve its marketing operations into a sophisticated trading house. Riyadh-watchers know that when the Saudis eventually choose to move, they rarely tinker at the edges.
While it has significant structural options to protect its market share – especially as it too has a Hormuz-bypass option in the Yanbu pipeline – Saudi Arabia holds cards that could fundamentally tilt the debate if deployed.
The existing benchmark system is deeply entrenched. True benchmarks require underlying physical liquidity – massive volumes of actual cargoes changing hands, being arbitraged and re-traded. Because many Gulf barrels go directly from wellhead to contracted refineries, there is less uncommitted oil for traders to swap.
Furthermore, established benchmarks such as Brent are sticky, deeply embedded in thousands of legal contracts and corporate risk-management systems. Dislodging them requires more than a better exchange product; it requires customer pushback, or a major producer willing to break the model deliberately.
Both are now possible. Indian, Chinese and other Asian refiners have grown increasingly uncomfortable with benchmarks linked to dwindling North Sea output and North Atlantic geopolitics. Simultaneously, in an era where long-term oil demand faces an accelerating energy transition and traditional maritime corridors look geopolitically fragile, the strategic value of a logistics bypass becomes paramount.
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The long-term repercussions could be transformational. Brent’s underlying production has been declining for years, propped up only by adding alternative North Sea and US grades. Some traders openly talk about Brent facing irrelevance by the middle of the next decade.
If that happens, the world will require a new global reference – and the strongest geographical candidate is currently Fujairah, the UAE port on the Arabian Sea. With sufficient storage and pipeline capacity outside the Strait of Hormuz, the UAE could eventually host a wider basket of non-disrupted Gulf grades. For those barrels, the geopolitical risk of the strait simply ceases to exist.
None of this is inevitable, and much depends on Saudi Arabia’s next move. But the fact that serious traders are actively discussing the possibility is telling. The benchmark wars may have begun, and Abu Dhabi fired the first shot.
Frank Kane is Editor-at-Large of AGBI and an award-winning business journalist. He acts as a consultant to the Ministry of Energy of Saudi Arabia